Finance Act 1970

Charge to tax: commutation of entire pension in special circumstances

3(1)Where—

(a)an approved scheme, or

(b)a statutory scheme to which section 22 of this Act applies,

contains a rule allowing, in special circumstances, a payment in commutation of an employee's entire pension, and any pension is commuted, whether wholly or not, under the rule, tax shall be charged on the amount by which the sum receivable exceeds—

(i)the largest sum which would have been receivable in com mutation of any part of the pension if the rule had conformed with paragraph 3 of Part I of this Schedule, or

(ii)the largest sum which would have been receivable in commutation of any part of the pension under any other rule of the scheme authorising the commutation of part (but not the whole) of the pension, or which would have been so receivable but for the said circumstances,

whichever gives the lesser amount chargeable to tax.

(2)Where any amount is chargeable to tax under this paragraph, the administrator of the scheme shall be charged to income tax under Case VI of Schedule D on that amount, and—

(a)the rate of the tax shall be one half of the standard rate of income tax for the year in which the amount is paid,

(b)the tax shall be charged on the amount paid or, if the rules permit the administrator to deduct the tax before payment, on the amount before deduction of tax,

(c)the amount so charged to tax shall not be treated as income for any other purpose of the Tax Acts.

(3)This paragraph shall not apply where the employee's employment was carried on outside the United Kingdom.

(4)In applying paragraphs (i) and (ii) of sub-paragraph (1) above the same considerations shall be taken into account, including the provisions of any other relevant scheme, as would have been taken into account by the Board in applying section 19 of this Act.

(5)Sub-paragraph (1)(b) above shall not apply to any payment made before the date appointed under section 22 of this Act.