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HMRC internal manual

Employment Income Manual

Employer-financed retirement benefits schemes: definition of 'scheme'

Section 393(4) ITEPA 2003 and Statement of Practice 13/91

There must be a ‘scheme’ for a charge to arise under the employer-financed retirement benefits scheme legislation.

The definition of scheme states that it ‘includes a deed, agreement, series of agreements or other arrangements’ providing for relevant benefits (see EIM15021 for the definition of relevant benefits). The definition therefore has a wide scope.

Statement of Practice 13/91 explains that, in HMRC’s view, the term ‘arrangement’ in this context goes wider than any prior formal or informal understanding between the employee and the employer. It also includes any system, plan, pattern or policy connected with the payment of a ‘relevant benefit’ (see EIM15021). A scheme may be quite informal. It includes, for example:

  • a decision at an employer’s meeting
  • a decision by an employee with delegated authority or in accordance with a policy
  • a situation where it is common practice for an employer to make a payment to a particular class of employees

Although the Statement of Practice was withdrawn with effect from 6 April 2006 following the introduction of the simplified tax regime for registered pension schemes that does not affect the validity of the Statement’s explanation of HMRC’s interpretation of the word “scheme”.

There may be exceptional circumstances where a payment is not made under an ‘arrangement’. The position in individual cases can be determined only on their facts. In cases where it is claimed that the facts of the case do not constitute a scheme or an employer is unsure whether the payment is made under a scheme please refer the case to Pension Scheme Services (Technical), FitzRoy House, Castle Meadow Road, Nottingham NG2 1BD.