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HMRC internal manual

Lloyd's Manual

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HM Revenue & Customs
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Names: earned income, pension contributions, NIC

Earned income

‘Earned income’ for income tax purposes is income from an individual’s business which is immediately derived from the carrying on by him of that business (ICTA88/S833 (4)(c)). Its main importance now is in determining what are relevant earnings for RAR and PPP purposes, or relevant UK earnings for entitlement to tax relief on contributions to a registered pension scheme.

From 6 April 1993, all profits from the business of underwriting as a member of Lloyd’s are deemed for all Names (‘working’ and ‘external’) to be earned income for income tax purposes (FA93/S180). This does not extend to the income received by partners from SLP members of Lloyd’s, but it does apply to income received by members of an LLP (see LLM6150).

As deemed ‘earned income’, Lloyd’s profits and losses are part of ‘relevant earnings’ for the purposes of working out the level of pension contributions and retirement annuity relief, and for entitlement to tax relief on contributions to a registered pension scheme. This deeming provision in FA93/S180 applies only to income tax, and does not determine the application of the Class 2 and Class 4 NIC charging provisions.

Pension contributions pre A-day

Relief for pension contributions was based on the total earned income for the year less certain deductions.

Carry back of pension payments

For pension contributions made in 1997-98 and later, the same rules apply to Names as to other taxpayers.

Time limits

From 6 April 2001, a Name (like any other taxpayer) paying a contribution up to 31 January in that same tax year could elect for that contribution to be treated as paid in the previous tax year. The election could only be made before or at the time of payment. It was not possible to carry back payments to a year before the preceding year.

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Class 4 National Insurance Contributions

‘Under Review’