This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Employment Income Manual

Employer-financed retirement benefits schemes: Extra-Statutory Concession A10 and relief under Section 395B ITEPA 2003: Section 615 schemes

Section 615(6) ICTA 1988

Section 615(3) schemes are mentioned in this EFRBS guidance because of their association with ESC A10 and later reliefs which often interact with EFRBS considerations.

The definition of an EFRBS in Section 393A ITEPA 2003 specifically excludes Section 615(3) schemes from its terms (see EIM15050). 

Section 615(3) concerns schemes with a specific overseas focus as defined in Section 615(6). The Section 615 category exists because there can be funds that are administered within the UK, but focussed overseas - in terms of having as their principal purpose the provision of benefits for employees whose service in employment is carried out wholly or mainly overseas.


A UK company has an overseas subsidiary with overseas employees. For governance purposes they decide to run the pension scheme for the overseas operation from the UK. The service is worked and benefits received overseas by non-UK resident individuals. But because the scheme is in the UK the pension received overseas will still have a UK source that can bring payments within the UK’s charging mechanisms, even if ultimately the individuals might be able to reclaim the charge. Section 615 makes special provision for such schemes to help avoid unnecessary charging.

Pension benefits

When a scheme matching the terms in Section 615(6) pays an annuity to a non-UK resident person, Section 615(3) provides that no income tax should be deducted. Section 615(3) also has detailed provisions turning off certain mandatory deductions of basic rate income tax by the payer of the pension (which would be required in Chapter 6 Part 15 ITA 2007).


From 6 April 2011 the disguised remuneration rules in Part 7A ITEPA 2003 can apply to certain events (‘relevant steps’) occurring in Section 615 schemes. However, pension income chargeable under Part 9 ITEPA 2003 is not charged via Part 7A because of the exclusion in Section 554S ITEPA 2003.

As with the situation before 6 April 2011, although the annuity payment may be chargeable to tax under Part 9, Section 615(3) can stop any actual deduction of tax from being made. Where the conditions are satisfied it negates the effect of the charge.

Lump sum benefits paid before 6 April 2011

Section 615 schemes may also provide lump sums to a certain extent. If such a lump sum was paid before 6 April 2011 by a scheme previously agreed with Pension Schemes Services (PSS) to be within Section 615(6), and a claim for concessionary treatment of the lump sum under Extra-Statutory Concession A10 was received, then further reference to PSS was not required. The treatment of any lump sum received would have followed that outlined in EIM15083 (penultimate paragraph of the concession) with potential for tax relief.

Lump sum benefits paid on or after 6 April 2011

As noted above, from 6 April 2011 the disguised remuneration rules in Part 7A ITEPA 2003 can apply to certain events occurring in Section 615 schemes. With regard to lump sums, Section 554W gives limited transitional protection to payments out of pre-6 April 2011 lump sum rights (as defined in EIM45635).

Lump sum rights accrued after 5 April 2011 are not protected by Section 554W, so can be chargeable to income tax under Chapter 2 Part 7A ITEPA 2003. However, in so far as the right accrued for non-UK service in a tax year after 5 April 2011 in which the member was non-UK resident, then Section 554Z4 (EIM45720) can reduce or negate the charge.


Section 554Z4 is not limited in scope to accruals after 5 April 2011, however earlier accruals of lump sum rights are covered by Section 554W as discussed above, so Section 554Z4 does not come into consideration for those earlier rights.

Closure of Section 615 schemes to further accrual

Paragraph 3 Schedule 3 Finance Act 2017

Section 615(6A) to (6C) ICTA 1988

With effect from 6 April 2017 no new schemes can be established under section 615(3) ICTA 1988.  Where a payment by an existing Section 615 scheme is made from funds accrued before that date, the tax treatment described above will continue to apply.  Section 615(3) will not apply, however, to a payment which is made wholly or partly from funds accrued on or after 6 April 2017.