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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Voluntary annual payments

Section 633 ITEPA 2003

The cases of Benyon v Thorpe (14TC1) and Stedeford v Beloe (16TC505) established the principle that pensions paid voluntarily by a former employer were not chargeable as pension income where such pensions had the character of gifts.

Section 570 ITEPA 2003 provides that a pension that is paid by or on behalf of a person who is in the United Kingdom will be chargeable under Section 569 ITEPA 2003 even if it is paid voluntarily, or is capable of being discontinued (see EIM74005). A similar provision applies for the purposes of foreign pensions chargeable under Section573 ITEPA 2003 (see EIM74500).

Section 633 ITEPA 2003 charges voluntary annual payments. These are payments that are paid voluntarily or are capable of being discontinued and satisfy the following conditions:

  • the payment is paid to a former employee or office holder or to their widow, widower, surviving civil partner, child, relative or dependant
  • the payment is paid by or on behalf of the person who employed the former employee (or the person under whom the office was held) or by the successors of that person
  • where the payment is paid by or on behalf of a person who is outside the United Kingdom, it is paid to a person resident in the United Kingdom.

Recurrent gifts

Section 633 ITEPA 2003 generally applies to payments that form a series of payments or gifts. Isolated gifts to former employees may be chargeable as employment income either as general earnings or because they are in connection with the termination of the employment (see EIM00610 and EIM12805 onwards).

Amount taxable as pension income

See EIM74101 for how to determine the taxable pension income where Section 633 ITEPA 2003 applies to a voluntary annual payment that is paid by or on behalf of a person who is in the United Kingdom.

See EIM74500 where Section 633 applies to a payment made by or on behalf of a person who is outside the United Kingdom.