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HMRC internal manual

Employment Income Manual

Employment income provided through third parties: undertakings given by employers etc in relation to retirement benefits etc: transition

Schedule 2 paragraph 58 FA 2011

Part 7A Chapter 3 ITEPA 2003 does not apply unless there is a ‘relevant undertaking’ see EIM45145.

Provision of security may be a step within Section 554Z19 see EIM45155.

These three examples illustrate the application of Part 7A Chapter 3 to relevant undertakings in place at 5 April 2011.

Example 1: security begins to be provided before 6 April 2011, continues to be provided after 5April 2011

Assume that:

  • the relevant undertaking was made and secured before 6 April 2011, and
  • it is not changed on or after that date in a way that increases the pension contributions to be paid pursuant to the undertaking.

Then the Part 7A rules do not apply for as long as security for the relevant undertaking in place at 6 April 2011 continues to be provided.

Example 2: same security, deficit made good

Assume that:

  • the facts are as in Example 1,
  • the value of the continuing security becomes insufficient, and
  • more sums and assets have to made subject to the security to cover fully the contributions to be paid.

This is not provision of new security. No step is taken within Section 554Z19.

Example 3: terms of relevant undertaking amended to increase contributions

Assume that:

  • the facts are as in Example 1, but
  • the terms of the relevant undertaking, for which the continuing security is provided, are changed so that the amount of pension contributions to be paid is increased.

This change in the terms is treated as provision of new security within Section 554Z19 covering the increase in the contributions to be paid. The amount of the step within Section 554Z19 is determined on a just and reasonable basis.