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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employer-financed retirement benefits schemes: receipts excluded from charge: prior employee contributions

Section 395 ITEPA 2003

[Notice: the guidance on this page should be read with the notice at the top of EIM15015]

Any employee contributions to the scheme (whether made before or after 6 April 2006) reduce the taxable amount of the lump sum, but may only be claimed once.

For example, say an employee has contributed £1,000 in year 1 and £1,500 in Year 2 to a scheme and lump sums of £4,000 and £1,300 are paid out in years 7 and 8 respectively. The employee contributions reduce the charge under Section 394 in year 7 by £2,500. Nothing is then available to reduce the charge in year 8 in respect of employee contributions.