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HMRC internal manual

Employment Income Manual

Employer-financed retirement benefits schemes: Extra-Statutory Concession A10: text

Extra-Statutory Concession A10

Until 6 April 2011, ‘foreign service’ relief was available under Extra-Statutory Concession A10 (see EIM13670).  The full text of ESC A10 was as follows:

‘Income tax is not charged on lump sum relevant benefits receivable by an employee (or by his personal representatives or any dependant of his) from an Overseas Retirement Benefits Scheme or an Overseas Provident Fund where the employee’s overseas service comprises

  1. not less than 75 per cent of his total service in that employment; or
  2. the whole of the last 10 years of his service in that employment, where total service exceeds 10 years; or
  3. not less than 50 per cent of his total service in that employment, including any 10 of the last 20 years, where total service exceeds 20 years.

If the employee’s overseas service is less than described above, relief from income tax will be given by reducing the amount of the lump sum which would otherwise be chargeable by the same proportion as the overseas service bears to the employee’s total service in that employment.

In addition, income tax is not charged on lump sum relevant benefits receivable by an employee (or by his personal representatives or any dependant of his) from any superannuation fund accepted as being within Section 615 ICTA 1988.

For the purposes of this concession, the term ‘relevant benefits’ has the meaning given in Section 612(1) ICTA 1988 and the term ‘overseas service’ shall be construed in accordance with the definition of ‘foreign service’ found at paragraph 10 Schedule 11 ICTA 1988.’

  • For the definition of relevant benefits see EIM15021.
  • For the definition of ‘foreign service’ for the purposes of ESC A10 see EIM13690.
  • For more details on the application of ESC A10 to Section 615 schemes see EIM15084.

Application of ESC A10 after 5 April 2011

It was announced on 31 March 2011 that ESC A10 would largely be withdrawn as new legislation at Part 7A ITEPA 2003 would provide a ‘just and reasonable’ reduction in the amount of employment income chargeable to income tax for duties performed outside the UK.  This new ‘just and reasonable’ reduction would operate for ‘overseas service’, however ESC A10 was to continue to apply to:

  • payments of lump sum relevant benefits received directly from the employer; and
  • payments of lump sum relevant benefits out of rights which had accrued before 6 April 2011.

To put this on a statutory footing, an Order was made on 4 February 2014 under section 160 Finance Act 2008.  Article 5 of The Enactment of Extra-Statutory Concessions Order 2014 (SI 2014/211) inserted section 395B into ITEPA 2003 and this, together with the working of Part 7A ITEPA 2003, achieves the above limited continuation of the effect of ESC A10 where relevant benefits are provided in respect of ‘foreign service’.

ESC A10 does not, therefore, apply to lump sum payments made on or after 5 February 2014. Foreign service relief on such payments is given by section 395B ITEPA 2003 - see EIM15325 for details.

There are worked examples showing the operation of relief under both ESC A10 and section 395B at EIM15326.