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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Employment income provided through third parties: undertakings given by employers etc in relation to retirement benefits etc: conditions

Sections 554Z16 and 554Z17 ITEPA 2003

Condition 1
Condition 2
Condition 3
Condition 4
Condition 5
Condition 6
Condition 7

Part 7A Chapter 3 ITEPA 2003 widens the Section 554A gateway. As a result, certain steps taken in relation to unregistered pension schemes give rise to Part 7A income.

Part 7A Chapter 3 applies if there is a ‘relevant undertaking’ that is, an undertaking that meets the seven conditions set out below.

If these conditions are met, then (to summarise):

  • B is a relevant third person, and
  • steps taken by B within Sections 554Z18 and 554Z19 are relevant steps within Section554B and will give rise to Part 7A income in the same way as relevant steps within Section 554B generally.

On Sections 554Z18 and 554Z19 (undertakings given by employers etc in relation to retirement benefits etc: earmarking etc and provision of security), see EIM45150 and EIM45155 respectively.

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Condition 1

  • There is an undertaking that a contribution will be paid.

This condition will still be met even if the undertaking is not legally enforceable.

It will also still be met even if the undertaking is to be performed only on or following the meeting of a condition including a condition which might never be met.

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Condition 2

  • The contribution is to be paid to an arrangement which is not a registered pension scheme.

‘Arrangement’ has a broad meaning. See EIM45855.

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Condition 3

  • In connection with that arrangement, a relevant third person is to provide ‘relevant benefits’ out of the contribution.

It does not matter whether the connection with the arrangement is direct or indirect. ‘Connection’ here has its normal English meaning.

‘Relevant third person’ has its usual meaning in the Part 7A rules see EIM45035. You ignore at this stage the third special rule mentioned in EIM45035, about B also being a relevant third person (by virtue of Section 554Z17) when B takes a step within Section 554Z18 or 554Z19. You consider such steps later on.

‘Relevant benefits’ has the same meaning as in Part 6 Chapter 2 ITEPA 2003 (EFRBS), except that, here, ‘relevant benefits’ can include benefits charged to tax under Part 9 ITEPA 2003 (pension income). See EIM15021.

It does not matter whether the relevant benefits are to be provided directly or indirectly out of the contribution.

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Condition 4

  • The provision of the relevant benefits would be a relevant step. See EIM45055 onwards.

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Condition 5

  • No relief from tax is given for the contribution by virtue of:

    • Schedule33 FA 2004 (overseas pension schemes: migrant member relief), or
    • Article 15 of SI 2006/572 (the Taxation of Pension Schemes (Transitional Provisions) Order 2006) (transitional corresponding relief).

On these reliefs, see RPSM13201000 onwards.

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Condition 6

  • No relief from tax is given for the contribution under one of the United Kingdom’s tax treaties. On such relief, see RPSM00500400 onwards.

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Condition 7

  • The contribution is not provision under an overseas pension scheme in respect of which A is exempted from tax under the benefits code by virtue of Section 307 ITEPA 2003 (exemption from provision made by employer for retirement or death benefit).