Employment income provided by third parties: exclusions: pension schemes
Sections 554E and 554Z17(2) ITEPA 2003
If a pension arrangement is one of the schemes listed below, no relevant step taken under it will give rise to Part 7A income.
- An arrangement the sole purpose of which is the provision of ‘excluded benefits’ see EIM15021.
- A pension scheme (within the meaning of Part 4 of FA 2004) set up by a government outside the United Kingdom for the benefit of its employees (or primarily for their benefit). You will find this definition of ‘pension scheme’ in RPSM20000000 (Registered Pension Scheme Manual: glossary).
- A registered pension scheme.
An arrangement the sole purpose of which is the making of ‘payments’:
- to which Section 161(4) FA 2004 applies in relation to a registered pension scheme (or a registered pension scheme which has been wound up), and
- which are authorised in relation to that scheme by Section 160(1) of FA 2004.
‘Payment’ here has the same meaning as in Part 4 Chapter 3 FA 2004 (payments by registered pension schemes) and thus includes a transfer of assets and any other transfer of money’s worth.
An EFRBS will not come within the last of those bullet points. That bullet point will only apply where:
- the sole purpose of an arrangement is to make payments to or in respect of a member, and
- statute deems the payments to be paid by a registered pension scheme (even though in reality they are not).
The most common example of such an arrangement is where a registered pension scheme provides a pension by purchasing an annuity from a life insurer for payment to the member.
The exclusion will not apply where the payments under the arrangement:
- would have been authorised payments if they had been paid by a registered pension scheme, but
- are neither so paid nor treated as so paid for the purposes of FA 2004.
Relevant steps within Sections 554Z18 and 554Z19
If the statutory conditions are met, a relevant step within Section 554Z18 or 554Z19 can come within a Section 554E exclusion.