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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Non-approved schemes: definition of 'scheme'

Section 612 (2) ICTA 1988 and Statement of Practice 13/1991

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

The definition of a scheme states that it ‘includes a deed, agreement, series of agreements or other arrangements’ providing for relevant benefits (see EIM15403 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 EIM15403). A scheme may be quite informal and 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 has been common practice for an employer to make a payment to a particular class of employees

Although this Statement has been withdrawn with effect from 6 April 2006 following the introduction of the simplified pensions tax regime for registered pension schemes, this does not affect HMRC’s interpretation of ‘scheme’ as explained in the guidance.

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 non-approved 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.