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HMRC internal manual

Employment Income Manual

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Employment income provided through third parties: exclusions: retirement benefits etc: employee pension contributions

Section 554T ITEPA 2003

Relevant step within Section 554B
Relevant step within Section 554C or 554D
Excluded pension contribution
Relevant benefits
Sourcing: direct or indirect
Sourcing: part or whole
How Sections 554T to 554X are related

Section 554T prevents relevant steps from giving rise to Part 7A income if they are taken in respect of sums of money or assets derived from A’s pension contributions.

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Relevant step within Section 554B

A relevant step within Section 554B will not give rise to Part 7A income if the sum of money or asset which is the subject of the step arises or derives from an ‘excluded pension contribution’ paid by A on or after 6 April 2011.

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Relevant step within Section 554C or 554D

A relevant step within Section 554C or 554D will not give rise to Part 7A income if the sum of money or asset which is the subject of the step:

  • represents ‘relevant benefits’, and
  • arises or derives from an excluded pension contribution paid by A.

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Excluded pension contribution

An excluded pension contribution is a contribution which passes seven tests. These tests are bulleted below.

  • A makes the contribution to an arrangement by way of a payment of a sum of money.
  • By virtue of this contribution, A acquires rights to receive relevant benefits under the arrangement (and nothing else).
  • Neither A nor any other individual is entitled to relief for the contribution under Section188 FA 2004 (registered pension schemes: relief for members’ contributions). See RPSM13103020.
  • No relief from tax is given for the contribution by virtue of

    • Schedule33 FA 2004 (overseas pension schemes: migrant member relief), or
    • Schedule 36 paragraph 51 FA 2004 (transitional corresponding relief).

On these reliefs, see RPSM13201000 onwards.

  • No relief from tax is given for the contribution under one of the United Kingdom’s tax treaties. On such relief, see RPSM00500400 onwards.
  • The contribution is not a repayment of any loan, nor does it have anything else to do with any loan.
  • The contribution has nothing to do with a sum of money or asset which has been the subject of a relevant step within Section 554C(1)(d). See EIM45070.

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Relevant benefits

‘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.

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Sourcing: direct or indirect

It makes no difference whether the sum of money or asset arises or derives directly or indirectly from the excluded pension contribution.

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Sourcing: part or whole

If the sum of money or asset arises or derives partly but not wholly from the excluded pension contribution, you treat the relevant step as being two relevant steps:

  • one in relation to the sum of money or asset so far as it does arise or derive from the excluded pension contribution, and
  • one in relation to the sum of money or asset so far as it does not.

And you then apportion the sum of money or asset on a just and reasonable basis between those two relevant steps.

Section 554T only shelters the former.

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How Sections 554T to 554X are related

Sections 554T, 554U, 554V, 554W and 554X are exclusions relating to retirement benefits etc.

To the extent that they apply, you apply them in that order.

On Section 554U (pre-6 April 2006 contributions to EFRBS), see EIM45620.

On Section 554V (purchases of annuities out of pension scheme rights), see EIM45625 onwards.

On Section 554W (certain retirement benefits etc), see EIM45635 onwards.

On Section 554X (transfers between certain foreign pension schemes), see EIM45645 onwards.