Finance Act 2004

Chapter 5U.K.Registered pension schemes: tax charges

Charges on authorised paymentsU.K.

204Authorised pensions and lump sumsU.K.

(1)Schedule 31 contains provision about the taxation of pensions and lump sums which are authorised to be paid by this Part.

(2)Schedule 36 contains (in Part 4) transitional provision about the taxation of annuities under existing retirement annuity contracts and other relevant transitional provision.

205Short service refund lump sum chargeU.K.

(1)A charge to income tax, to be known as the short service refund lump sum charge, arises where a short service refund lump sum is paid by a registered pension scheme.

(2)The person liable to the short service refund lump sum charge is the scheme administrator.

(3)The scheme administrator is liable to the short service refund lump sum charge whether or not—

(a)the scheme administrator, and

(b)the person to whom the short service refund lump sum is paid,

are residentF1... or domiciled in the United Kingdom.

(4)The rate of the charge is—

(a)20% in respect of so much of the lump sum as does not exceed [F2£20,000], and

(b)[F350%] in respect of so much (if any) of it as exceeds that limit.

(5)The Treasury may by order amend subsection (4) so as to—

(a)increase or decrease either or both of the rates for the time being specified in that subsection, or

(b)increase the limit for the time being specified in paragraph (a) of that subsection.

(6)Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

(7)A short service refund lump sum is not to be treated as income for any purpose of the Tax Acts.

F4205ASerious ill-health lump sum chargeU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

206Special lump sum death benefits chargeU.K.

(1)A charge to income tax, to be known as the special lump sum death benefits charge, arises where—

(a)a pension protection lump sum death benefit,

(b)an annuity protection lump sum death benefit, F5...

[F6(c)a drawdown pension fund lump sum death benefit,] [F7or

(d)a flexi-access drawdown fund lump sum death benefit,]

is paid [F8, to a non-qualifying person,] by a registered pension scheme [F9in respect of a member who had reached the age of 75 at the date of the member's death].

[F10(1ZA)In subsection (1) the reference to a member (and to the member's death) are to be read—

(a)in relation to—

(i)a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29, or

(ii)a flexi-access drawdown fund lump sum death benefit under paragraph 17A(2) of Schedule 29,

as a reference to a dependant (and to the dependant's death),

(b)in relation to a flexi-access drawdown fund lump sum death benefit under paragraph 17A(3) of Schedule 29, as a reference to a nominee (and to the nominee's death), and

(c)in relation to a flexi-access drawdown fund lump sum death benefit under paragraph 17A(4) of Schedule 29, as a reference to a successor (and to the successor's death).]

[F11(1A)The special lump sum death benefits charge also arises where—

(a)a defined benefits lump sum death benefit, or

(b)an uncrystallised funds lump sum death benefit,

is paid [F12, to a non-qualifying person,] by a registered pension scheme in respect of a member who had reached the age of 75 at the date of the member's death.]

[F13(1B)The special lump sum death benefits charge also arises where—

(a)a lump sum death benefit is paid [F14, to a non-qualifying person,] by a registered pension scheme in respect of a member of the scheme who had not reached the age of 75 at the date of the member's death,

(b)the lump sum death benefit is—

(i)a drawdown pension fund lump sum death benefit under paragraph 17(1) of Schedule 29,

(ii)a flexi-access drawdown fund lump sum death benefit under paragraph 17A(1) of Schedule 29,

[F15(iia)a defined benefits lump sum death benefit,]or

(iii)an uncrystallised funds lump sum death benefit, and

(c)the lump sum death benefit is not paid before the end of the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the member's death and the day on which the scheme administrator could first reasonably have been expected to have known of it.

(1C)The special lump sum death benefits charge also arises where—

(a)a lump sum death benefit is paid [F16, to a non-qualifying person,] by a registered pension scheme on the death of a dependant, nominee or successor of a deceased member of the scheme,

(b)the dependant, nominee or successor (“the beneficiary”) had not reached the age of 75 at the date of the beneficiary's death,

(c)the lump sum death benefit is—

(i)a drawdown pension fund lump sum death benefit under paragraph 17(2) of Schedule 29, or

(ii)a flexi-access drawdown fund lump sum death benefit under paragraph 17A(2), (3) or (4) of Schedule 29, and

(d)the lump sum death benefit is not paid before the end of the period of two years beginning with the earlier of the day on which the scheme administrator of the scheme first knew of the beneficiary's death and the day on which the scheme administrator could first reasonably have been expected to have known of it.]

(2)The person liable to the special lump sum death benefits charge is the scheme administrator.

(3)The scheme administrator is liable to the special lump sum death benefits charge whether or not—

(a)the scheme administrator, and

(b)the person to whom the lump sum death benefit is paid,

are residentF17... or domiciled in the United Kingdom.

(4)The rate of the charge is [F1845%] in respect of the lump sum death benefit.

(5)The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

(6)Tax under this section is to be charged on the amount of the lump sum paid or, if the rules of the pension scheme permit the scheme administrator to deduct the tax before payment, on the amount of the lump sum before deduction of tax.

[F19(7)A lump sum death benefit in respect of which income tax is charged under this section is not to be treated as income for any purpose of the Tax Acts [F20(but see subsection (8)).]]

[F21(8)Where—

(a)a lump sum death benefit in respect of which tax is charged under this section is one paid to a non-qualifying person in the person's capacity as a trustee, and

(b)a payment of any part of the lump sum is made out of a settlement to a beneficiary who is an individual,

the amount received by the beneficiary, together with so much of the tax charged under this section on the lump sum as is attributable to the amount received by the beneficiary, is income of the beneficiary for income tax purposes but the beneficiary may claim to deduct that much of that tax from the income tax charged on the beneficiary's total income for the tax year in which the payment is made to the beneficiary.

(9)For the purposes of this section, a person is a “non-qualifying person” in relation to payment of a lump sum if—

(a)the person is not an individual, or

(b)the person is an individual and the payment is made to the person in the person's capacity as—

(i)a trustee or personal representative,

(ii)a director of a company,

(iii)a partner in a firm, or

(iv)a member of a limited liability partnership,

except that a person is not a “non-qualifying person” in relation to payment of a lump sum if the payment is made to the person in the person's capacity as a bare trustee.

(10)In subsection (9)—

• “bare trustee” means a person acting as trustee for—

  (a)

  an individual absolutely entitled as against the trustee,

  (b)

  two or more individuals who are so entitled,

  (c)

  an individual who would be so entitled but for being a minor or otherwise lacking legal capacity, or

  (d)

  two or more individuals who would be so entitled but for all or any of them being a minor or otherwise lacking legal capacity,

• “director” is read in accordance with section 452 of CTA 2010, and

• references to a firm are to be read in the same way as references to a firm in Part 9 of ITTOIA 2005 (which contains special provision about partnerships).]

207Authorised surplus payments chargeU.K.

(1)A charge to income tax, to be known as the authorised surplus payments charge, arises where an authorised surplus payment is made to a sponsoring employer by an occupational pension scheme that is a registered pension scheme.

(2)The person liable to the authorised surplus payments charge is the scheme administrator.

(3)The scheme administrator is liable to the authorised surplus payments charge whether or not—

(a)the scheme administrator, and

(b)the sponsoring employer,

are residentF22... or domiciled in the United Kingdom.

(4)The rate of the charge is 35% in respect of the authorised surplus payment.

(5)The Treasury may by order increase or decrease the rate for the time being specified in subsection (4).

(6)Subsection (1) does not apply to any authorised surplus payment—

(a)to the extent that (if this section had not been enacted) the sponsoring employer would have been exempt, or entitled to claim exemption, from income tax or corporation tax in respect of it, or

(b)if the sponsoring employer is a charity.

[F23(6A)Subsection (1) does not apply to an authorised surplus payment to the extent that the payment is funded (directly or indirectly) by a surrender of (or an agreement to surrender) benefits or rights which results in the registered pension scheme being treated as making an unauthorised payment under section 172A.

(6B)Terms used in subsection (6A) which are defined in section 172A have the same meaning as they have in that section.]

(7)An authorised surplus payment in respect of which income tax is charged under this section is not to be treated as income for any purpose of the Tax Acts.

(8)Schedule 36 contains (in Part 4) transitional provisions about the authorised surplus payments charge.

Unauthorised payments chargeU.K.

208Unauthorised payments chargeU.K.

(1)A charge to income tax, to be known as the unauthorised payments charge, arises where an unauthorised payment is made by a registered pension scheme.

(2)The person liable to the charge—

(a)in the case of an unauthorised member payment [F24made to or in respect of a person before the person's death, is the person,]

(b)in the case of an unauthorised member payment made [F25in respect of a person after the person's] death, is the recipient, and

(c)in the case of an unauthorised employer payment, is the [F26person] to or in respect of whom the payment is made.

(3)If more than one person is liable to the unauthorised payments charge in respect of an unauthorised payment, those persons are jointly and severally liable to the charge in respect of the payment.

(4)A person is liable to the unauthorised payments charge whether or not—

(a)that person,

(b)any other person who is liable to the unauthorised payments charge, and

(c)the scheme administrator,

are residentF27... or domiciled in the United Kingdom.

(5)The rate of the charge is 40% in respect of the unauthorised payment.

[F28(6)The Treasury may by order amend subsection (5) so as to vary the rate of the unauthorised payments charge.

(6A)An order under subsection (6) may make provision for there to be different rates in different circumstances.]

(7)An unauthorised payment may also be subject to—

(a)the unauthorised payments surcharge under section 209, and

(b)the scheme sanction charge under section 239.

(8)An unauthorised payment is not to be treated as income for any purpose of the Tax Acts.

209Unauthorised payments surchargeU.K.

(1)A charge to income tax, to be known as the unauthorised payments surcharge, arises where a surchargeable unauthorised payment is made by a registered pension scheme.

(2)“Surchargeable unauthorised payments” means—

(a)surchargeable unauthorised member payments (see section 210), and

(b)surchargeable unauthorised employer payments (see section 213).

(3)The person liable to the charge—

(a)in the case of a surchargeable unauthorised member payment [F29made to or in respect of a person before the person's death, is the person,]

(b)in the case of a surchargeable unauthorised member payment made [F30in respect of a person after the person's] death, is the recipient, and

(c)in the case of a surchargeable unauthorised employer payment, is the [F31person] to or in respect of whom the payment was made.

(4)If more than one person is liable to the unauthorised payments surcharge in respect of a surchargeable unauthorised payment, those persons are jointly and severally liable to the surcharge in respect of the payment.

(5)A person is liable to the unauthorised payments surcharge whether or not—

(a)that person,

(b)any other person who is liable to the unauthorised payments surcharge, F32...

(c)the scheme administrator, [F33and]

[F34(d)the sub-scheme administrator,]

are residentF35... or domiciled in the United Kingdom.

(6)The rate of the charge is 15% in respect of the surchargeable unauthorised payment.

[F36(7)The Treasury may by order amend subsection (6) so as to vary the rate of the unauthorised payments surcharge.

(8)An order under subsection (7) may make provision for there to be different rates in different circumstances.]

210Surchargeable unauthorised member paymentsU.K.

(1)This section identifies which unauthorised member payments made by a registered pension scheme [F37to or in respect of a person who is or has been a member of] the pension scheme are surchargeable.

(2)If the surcharge threshold is reached before the end of the period of 12 months beginning with a reference date, each unauthorised member payment made [F38to or in respect of the person] in the surcharge period is surchargeable.

(3)The surcharge period is the period—

(a)beginning with the reference date, and

(b)ending with the day on which the surcharge threshold is reached.

(4)The first reference date is the date on which the pension scheme first makes an unauthorised member payment [F39to or in respect of the person].

(5)Each subsequent reference date is the date, after the end of the previous reference period, on which the pension scheme next makes an unauthorised member payment [F40to or in respect of the person].

(6)The previous reference period is the period of 12 months beginning with the previous reference date or, if the surcharge threshold is reached in that period, is the surcharge period ending with the date on which it was reached.

(7)The surcharge threshold is reached if the unauthorised payments percentage reaches 25%.

(8)The unauthorised payments percentage is the aggregate of the percentages of the pension fund used up by each unauthorised member payment made by the pension scheme [F41to or in respect of the person] on or after the reference date.

(9)The percentage of the pension fund used up on the occasion of an unauthorised member payment is—

(10)The value of the member’s rights under [F43an arrangement on any] date is the aggregate of—

(a)the value of the member’s crystallised rights under the arrangement on that date, calculated in accordance with section 211, and

(b)the value of the member’s uncrystallised rights under the arrangement on that date, calculated in accordance with section 212.

211Valuation of crystallised rights for purposes of section 210U.K.

(1)The value of the member’s crystallised rights under [F44an arrangement] on any date is the aggregate of—

(a)the value of each scheme pension or lifetime annuity to which the member has an actual (rather than a prospective) entitlement under the arrangement on that date, F45...

(b)the aggregate of the amount of the sums, and the market value of the assets, representing the [F46member's drawdown pension fund] in respect of the arrangement on that date (if any)[F47, and

(c)the aggregate of the amount of the sums, and the market value of the assets, representing the member's flexi-access drawdown fund in respect of the arrangement on that date (if any).]

(2)The value of a scheme pension or lifetime annuity is—

212Valuation of uncrystallised rights for purposes of section 210U.K.

(1)Rights are uncrystallised if the member is not entitled to the present payment of benefits in respect of the rights.

(2)The member is to be treated as entitled to the present payment of benefits in respect of the sums and assets representing the [F48member's drawdown pension fund] [F49or the member's flexi-access drawdown fund].

(3)The value of the member’s uncrystallised rights under [F50an arrangement] on any date is to be calculated—

(a)in accordance with subsection (4) if the arrangement is a cash balance arrangement,

(b)in accordance with subsection (5) if the arrangement is a money purchase arrangement [F51that is neither a cash balance arrangement nor a collective money purchase arrangement],

(c)in accordance with subsection (6) if the arrangement is a defined benefits arrangement [F52or a collective money purchase arrangement], and

(d)in accordance with subsection (7) if the arrangement is a hybrid arrangement.

(4)If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits in respect of those rights if the member became entitled to benefits in respect of those rights on the date.

(5)If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date is the aggregate of—

(a)the amount of such of the sums held for the purposes of the arrangement on the date as represent those rights, and

(b)the market value of such of the assets held for the purposes of the arrangement on the date as represent those rights.

(6)If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date is—

[F53(7)If this subsection applies, the value of the member's uncrystallised rights under the arrangement on the date (“the hybrid value”) is to be calculated by taking the following steps—

• Step 1 In relation to each relevant variety of benefits, calculate (in accordance with the preceding provisions of this section) the value of the member's uncrystallised rights on the date, assuming that benefits of that variety are provided under the arrangement.

• Step 2 The hybrid value is the higher or highest of the amounts determined under step 1.”

(8)For the purposes of this section a variety of benefits is “relevant” in relation to a hybrid arrangement if, in any circumstances, benefits of that variety may be provided under the arrangement.

(9)In this section “variety of benefits” means a variety of benefits specified in section 152(10).]

213Surchargeable unauthorised employer paymentsU.K.

(1)This section identifies which unauthorised employer payments made by a registered pension scheme to or in respect of a [F54person who is or has been a] sponsoring employer are surchargeable.

(2)If the surcharge threshold is reached before the end of the period of 12 months beginning with a reference date, each unauthorised employer payment made to or in respect of the [F55person] in the surcharge period is surchargeable.

(3)The surcharge period is the period—

(a)beginning with the reference date, and

(b)ending with the day on which the surcharge threshold is reached.

(4)The first reference date is the date on which the pension scheme first makes an unauthorised employer payment to or in respect of the [F56person].

(5)Each subsequent reference date is the date, after the end of the previous reference period, on which the pension scheme next makes an unauthorised employer payment to or in respect of the [F57person].

(6)The previous reference period is the period of 12 months beginning with the previous reference date or, if the surcharge threshold is reached in that period, is the surcharge period ending with the date on which it was reached.

(7)The surcharge threshold is reached if the unauthorised payments percentage reaches 25%.

(8)The unauthorised payments percentage is the aggregate of the percentages of the pension fund used up by each unauthorised employer payment made by the pension scheme to or in respect of the [F58person] on or after the reference date.

(9)The percentage of the pension fund used up on the occasion of an unauthorised employer payment is—

F59...U.K.

F59213AHigh income excess relief chargeU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213BHigh incomeU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213CGross incomeU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213DRelevant incomeU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213EThe appropriate rateU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213FTotal pension savings amountU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213GMoney purchase arrangements other than cash balance arrangementsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213HCash balance arrangementsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213IAdjustment of closing rightsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213JDefined benefits arrangementsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213KAdjustment of closing pension and lump sumU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213LAge-related factorsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213MUprating of opening rights, pension and lump sumU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213NHybrid arrangementsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F59213OAnti-avoidanceU.K.

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F59213PPower to make regulations about chargeU.K.

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Lifetime allowance chargeU.K.

214Lifetime allowance chargeU.K.

(1)A charge to income tax, to be known as the lifetime allowance charge, arises where—

(a)a benefit crystallisation event occurs in relation to an individual who is a member of one or more registered pension schemes, and

(b)either the first lifetime allowance charge condition or the second lifetime allowance charge condition is met.

(2)The first lifetime allowance charge condition is that—

(a)the whole or any part of the individual’s lifetime allowance is available on the benefit crystallisation event, but

(b)the amount crystallised by the benefit crystallisation event exceeds the amount of the individual’s lifetime allowance which is available on the benefit crystallisation event.

(3)The second lifetime allowance charge condition is that none of the individual’s lifetime allowance is available on the benefit crystallisation event.

(4)The following sections make further provision about the lifetime allowance charge—

• section 215 (amount of charge),

• section 216 and Schedule 32 (benefit crystallisation events and amounts crystallised),

• section 217 (persons liable to charge),

• section 218 (individual’s lifetime allowance and standard lifetime allowance),

• section 219 (availability of individual’s lifetime allowance), and

• sections 220 to 226 (lifetime allowance enhancement factors).

(5)In sections 215 to 219—

(a)references to “the individual”, in relation to the lifetime allowance charge, are to the individual in relation to whom the benefit crystallisation event giving rise to the charge occurs, and

(b)references to “the pension scheme”, in relation to the lifetime allowance charge, are to the pension scheme to which the benefit crystallisation event giving rise to the charge, or the amount crystallised by it, relates.

(6)Schedule 36 contains (in Part 2) transitional provision about the lifetime allowance charge.

215Amount of chargeU.K.

(1)The lifetime allowance charge is a charge in respect of the chargeable amount.

(2)The lifetime allowance charge is a charge—

(a)at the rate of 55% in respect of so much (if any) of the chargeable amount as constitutes the lump-sum amount, and

(b)at the rate of 25% in respect of so much (if any) of the chargeable amount as constitutes the retained amount.

[F60(2A)The Treasury may by order amend subsection (2) so as to vary the rates of the lifetime allowance charge.

(2B)An order under subsection (2A) may make provision for there to be different rates in different circumstances.]

(3)The “chargeable amount” is the aggregate of—

(a)the basic amount, and

(b)any amount which is treated as forming part of the lump-sum amount under subsection (6) or of the retained amount under subsection (8).

(4)The “basic amount”—

(a)if the first lifetime allowance [F61charge] condition is met, is the amount by which the amount crystallised by the benefit crystallisation event exceeds the amount of the individual’s lifetime allowance available on it, and

(b)if the second lifetime allowance charge condition is met, is the amount crystallised by the benefit crystallisation event.

(5)The “lump-sum amount” is the aggregate of—

(a)so much of the basic amount as is paid as a lump sum to the individual or a lump sum death benefit in respect of the individual, and

(b)any amount which is treated as forming part of the lump-sum amount under subsection (6).

(6)If and to the extent that the tax payable under this section on any of the lump-sum amount is covered by a scheme-funded tax payment, it is to be treated as itself forming part of the lump-sum amount.

(7)The “retained amount” is the aggregate of—

(a)so much of the basic amount as is not paid as a lump sum to the individual or a lump sum death benefit in respect of the individual, and

(b)any amount which is treated as forming part of the retained amount under subsection (8).

(8)If and to the extent that the tax payable under this section on any of the retained amount is covered by a scheme-funded tax payment, it is to be treated as itself forming part of the retained amount.

(9)An amount of tax payable under this section is “covered by a scheme-funded tax payment” if—

(a)the tax is paid by the scheme administrator, F62...

F62(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F63(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11)The chargeable amount is not to be treated as income for any purpose of the Tax Acts.

216Benefit crystallisation events and amounts crystallisedU.K.

(1)This table sets out—

(a)the events which are benefit crystallisation events in relation to the individual, and

(b)the amount which is crystallised by each of those events.

(2)Schedule 32 gives the meaning of expressions used in the table in subsection (1).

217Persons liable to chargeU.K.

(1)The persons liable to the lifetime allowance charge are—

(a)the individual, and

(b)the scheme administrator of the pension scheme,

and their liability is joint and several.

[F79(1A)Subsection (1) is subject to subsections (2) and (2A).]

(2)[F80Where] the liability arises by reason of the payment of a relevant lump sum death benefit it is a liability of the person to whom the lump sum death benefit is paid.

[F81(2A)Where the liability arises by reason of a designation mentioned in the description of benefit crystallisation event 5C, [F82or by reason of a person becoming entitled to an annuity as mentioned in the description of benefit crystallisation event 5D,] it is a liability of the dependant or nominee (as the case may be).]

[F83(3)Subsection (4) applies if—

(a)two or more relevant post-death benefit crystallisation events occur in respect of an individual, and

(b)tax is not chargeable on the whole of the total of the amounts crystallised by them.

(4)The person liable under subsection (2) or (2A) to the lifetime allowance charge charged by reason of the occurrence of any one of the relevant post-death benefit crystallisation events is liable to such portion of the total amount of the tax payable by reason of the relevant post-death benefit crystallisation events having occurred as appears to an officer of Revenue and Customs to be just and reasonable.

(4A)For the purposes of subsections (3) and (4), a benefit crystallisation event is a “relevant post-death benefit crystallisation event” if it is benefit crystallisation event 5C [F84, 5D] or 7.]

(5)A person is liable to the lifetime allowance charge whether or not—

(a)that person,

(b)any other person who is liable to the lifetime allowance charge, and

(c)the scheme administrator (if not so liable),

are residentF85... or domiciled in the United Kingdom.

218Individual’s lifetime allowance and standard lifetime allowanceU.K.

(1)Subject as follows, the individual’s lifetime allowance is the standard lifetime allowance.

[F86(2)The standard lifetime allowance for the tax years 2016-17 and 2017-18 is £1,000,000.

(2A)The standard lifetime allowance for any later tax year (“the subsequent tax year”) is the same as the standard lifetime allowance for the tax year immediately preceding the subsequent tax year, unless subsection (2C) provides for it to be higher.

(2B)Subsection (2C) applies if—

(a)the consumer prices index for the month of September in any tax year (“the prior tax year”) is higher than it was for the previous September, and

(b)the prior tax year is the tax year 2017-18 or a later tax year.

(2C)The standard lifetime allowance for the tax year following the prior tax year is the standard lifetime allowance for the prior tax year—

(a)increased by the percentage increase in the index, and

(b)if the result is not a multiple of £100, rounded up to the nearest amount which is such a multiple.

(2D)The Treasury must before the tax year 2018-19, and before each subsequent tax year, make regulations specifying the amount given by subsections (2A) to (2C) as the standard lifetime allowance for the tax year concerned.]

(4)Where one or more lifetime allowance enhancement factors operate in relation to a benefit crystallisation event occurring in relation to the individual, the individual’s lifetime allowance at the time of the benefit crystallisation event is—

(5)The following make provision for the operation of lifetime allowance enhancement factors—

• section 220 (pension credits from previously crystallised rights),

• sections 221 to 223 (individuals who are not always relevant UK individuals),

• sections 224 to 226 (transfers from recognised overseas pension schemes),

• paragraphs 7 to 11 of Schedule 36 (primary protection), and

• paragraph 18 of that Schedule (pre-commencement pension credits).

[F87(5A)Where the operation of a lifetime allowance enhancement factor is provided for by any of sections 220, 222, 223 and 224 and the time mentioned in the definition of SLA in the section concerned was before 6 April 2012, subsection (4) has effect as if the amount to be multiplied by LAEF were £1,800,000 (the standard lifetime allowance for the tax year 2011-12) if that is greater than SLA.

(5B)Where the operation of a lifetime allowance enhancement factor is provided for by paragraph 7 of Schedule 36, subsection (4) has effect as if SLA were £1,800,000 (the standard lifetime allowance for the tax year 2011-12) if that is greater than SLA.

[F88(5BA)Where the operation of a lifetime allowance enhancement factor is provided for by any of sections 220, 222, 223 and 224 and the time mentioned in the definition of SLA in the section concerned fell within the period consisting of the tax year 2012-13 and the tax year 2013-14, subsection (4) has effect as if the amount to be multiplied by LAEF were £1,500,000 if that is greater than SLA.

(5BB)Where more than one lifetime allowance enhancement factor operates, subsection (5BA) does not apply if subsection (5A) or (5B) applies.]

[F89(5BC)Where the operation of a lifetime allowance enhancement factor is provided for by any of sections 220, 222, 223 and 224 and the time mentioned in the definition of SLA in the section concerned fell within the period consisting of the tax year 2014-15 and the tax year 2015-16, subsection (4) has effect as if the amount to be multiplied by LAEF were £1,250,000 if that is greater than SLA.

(5BD)Where more than one lifetime allowance enhancement factor operates, subsection (5BC) does not apply if any of subsections (5A), (5B) and (5BA) applies.]

(5C)Where benefit crystallisation event 7 occurs on or after 6 April 2012 by reason of the payment of a relevant lump sum death benefit in respect of the death of the individual before that date, the standard lifetime allowance at the time of the benefit crystallisation event is £1,800,000 (the standard lifetime allowance for the tax year 2011-12).]

[F90(5D)Where benefit crystallisation event 7 occurs on or after 6 April 2014 by reason of the payment of a relevant lump sum death benefit in respect of the death of the individual during the period consisting of the tax year 2012-13 and the tax year 2013-14, the standard lifetime allowance at the time of the benefit crystallisation event is £1,500,000.]

[F91(5E)Where benefit crystallisation event 7 occurs on or after 6 April 2016 by reason of the payment of a relevant lump sum death benefit in respect of the death of the individual during the period consisting of the tax year 2014-15 and the tax year 2015-16, the standard lifetime allowance at the time of the benefit crystallisation event is £1,250,000.]

[F92(5F)Where—

(a)benefit crystallisation event 5C occurs by reason of the designation on or after 6 April 2015 of sums or assets held for the purposes of an arrangement relating to the individual, and

(b)the individual died before 6 April 2012,

the standard lifetime allowance at the time of the benefit crystallisation event is £1,800,000.

(5G)Where—

(a)benefit crystallisation event 5C occurs by reason of the designation on or after 6 April 2015 of sums or assets held for the purposes of an arrangement relating to the individual, and

(b)the individual died in the period consisting of the tax year 2012-13 and the tax year 2013-14,

the standard lifetime allowance at the time of the benefit crystallisation event is £1,500,000.

(5H)Where—

(a)benefit crystallisation event 5C occurs by reason of the designation on or after 6 April 2016 of sums or assets held for the purposes of an arrangement relating to the individual, and

(b)the individual died in the period consisting of the tax year 2014-15 and the tax year 2015-16,

the standard lifetime allowance at the time of the benefit crystallisation event is £1,250,000.

(5I)Where—

(a)benefit crystallisation event 5D occurs by reason of a person becoming entitled on or after 6 April 2016 to an annuity in respect of the individual, and

(b)the individual died in the period beginning with 3 December 2014 and ending with 5 April 2016,

the standard lifetime allowance at the time of the benefit crystallisation event is £1,250,000.]

(6)Paragraph 19 of that Schedule makes provision for the reduction of what would otherwise be the individual’s lifetime allowance in certain cases where the individual is permitted to take pension before normal minimum pension age.

(7)In this Part references (however expressed) to a person’s lifetime allowance at any time are to what would be the person’s lifetime allowance, calculated in accordance with this section, if a benefit crystallisation event occurred in relation to the person at that time.

219Availability of individual’s lifetime allowanceU.K.

(1)This section is about the availability of the individual’s lifetime allowance on the occurrence of a benefit crystallisation event in relation to the individual (“the current benefit crystallisation event”).

(2)If no benefit crystallisation event has occurred in relation to the individual before the current benefit crystallisation event, the whole of the individual’s lifetime allowance is available on the current benefit crystallisation event.

(3)If one or more benefit crystallisation events have occurred in relation to the individual before the current benefit crystallisation event—

(a)in a case in which the previously-used amount is equal to or greater than the amount of the individual’s lifetime allowance, none of the individual’s lifetime allowance is available on the current benefit crystallisation event, and

(b)in any other case, so much of the individual’s lifetime allowance as is left after deducting the previously-used amount is available on the current benefit crystallisation event.

(4)The previously-used amount is—

(a)where one benefit crystallisation event has occurred in relation to the individual before the current benefit crystallisation event, the amount [F93which is the relevant untaxed amount in relation to] the previous benefit crystallisation event as adjusted under subsection (5), or

(b)where two or more benefit crystallisation events have occurred in relation to the individual before the current benefit crystallisation event, the aggregate of the amounts [F94which are the relevant untaxed amounts in relation to] each previous benefit crystallisation event as adjusted under subsection (5).

[F95(4A)“The relevant untaxed amount”, in relation to a previous benefit crystallisation event, is—

(a)where no tax was charged in relation to the benefit crystallisation event, the amount in respect of which tax would have been so charged if none of the individual's lifetime allowance had been available, and

(b)where tax was charged in relation to the benefit crystallisation event, so much of the amount in respect of which tax would have been so charged if none of the individual's lifetime allowance had been available as exceeds the amount in respect of which tax was so charged.]

(5)The adjustment of the [F96relevant untaxed amount in relation to] a previous benefit crystallisation event referred to in subsection (4)(a) and (b) is the multiplication of that amount by—

[F97(5A)If paragraph 7 of Schedule 36 (primary protection) makes provision for a lifetime allowance enhancement factor in relation to the individual, subsection (5) has effect [F98where the previous benefit crystallisation event occurred before 6 April 2014] as if CSLA were £1,500,000 if that is greater than CSLA.]

(6)Where more than one benefit crystallisation event occurs in relation to an individual on the same day, it is for the individual to decide the order in which they are to be treated as occurring for the purposes of this section; but this subsection is subject to section 166(2) (entitlement to pension commencement lump sum to arise immediately before entitlement to associated pension).

(7)Where more than one [F99relevant post-death] benefit crystallisation event occurs F100... in respect of an [F101individual, the relevant post-death] benefit crystallisation events are to be treated for the purposes of this section as occurring immediately before the individual’s death [F102but immediately after any benefit crystallisation event occurring immediately before the individual's death by virtue of section 166(2)].

[F103(7A)For the purposes of subsection (7), a benefit crystallisation event is a “relevant post-death benefit crystallisation event” if it is benefit crystallisation event 5C [F104 , 5D] or 7.]

(8)Paragraph 20 of Schedule 36 makes provision affecting this section in relation to pre-commencement pensions.

(9)In this Part references (however expressed) to the portion of a person’s lifetime allowance that is available at any time are to the portion of the person’s lifetime allowance that would be available, calculated in accordance with this section, if a benefit crystallisation event occurred in relation to the person at that time.

220Pension credits from previously crystallised rightsU.K.

(1)This section makes provision for the operation of a lifetime allowance enhancement factor with respect to a benefit crystallisation event occurring in relation to an individual where—

(a)the individual has (at any time after 5th April 2006 but before the benefit crystallisation event) acquired rights under a registered pension scheme by reason of having become entitled to a pension credit,

(b)the pension credit derived from the same or another registered pension scheme, and

(c)the rights under that registered pension scheme which became subject to the corresponding pension debit consisted of or included rights to a post-commencement pension in payment.

(2)“Post-commencement pension in payment” means a pension to which a person became (actually) entitled on or after 6th April 2006.

(3)The lifetime allowance enhancement factor is the pension credit factor.

(4)The pension credit factor is—

[F106(4A)The post-commencement pension in payment portion of the appropriate amount referred to in the definition of APC—

(a)in a case where the appropriate amount is arrived at under section 29(2) or (3)(b) of WRPA 1999 or Article 26(2) or (3)(b) of WRP(NI)O 1999, is so much of that amount as is attributable to rights to a post-commencement pension in payment, and

(b)in a case where the appropriate amount is arrived at under section 29(3)(a) of WRPA 1999 or Article 26(3)(a) of WRP(NI)O 1999, is so much of that amount as is just and reasonable.]

(5)This section only applies if notice of intention to rely on it is given to the Inland Revenue in accordance with regulations made by the Board of Inland Revenue.

221Non-residence: generalU.K.

(1)This section makes provision for the operation of a lifetime allowance enhancement factor with respect to a benefit crystallisation event occurring in relation to an individual where, during any part of the period that is the active membership period in relation to an arrangement relating to the individual under a registered pension scheme, the individual is a relevant overseas individual.

(2)Section 222 provides the lifetime allowance enhancement factor in the case of an arrangement that is a money purchase arrangement; and section 223 provides the lifetime allowance enhancement factor in the case of any other arrangement.

(3)For the purposes of this Part an individual is a relevant overseas individual at any time if, at that time, the individual either is not a relevant UK individual or—

(a)is a relevant UK individual only by virtue of paragraph (c) of section 189(1) (individuals resident in UK at some time in previous five tax years), and

(b)is not employed by a person resident in the United Kingdom.

(4)In this section and sections 222 and 223 “the active membership period”, in relation to a benefit crystallisation event occurring in relation to an arrangement relating to the individual, is the period—

(a)beginning with the date on which the benefits first began to accrue to or in respect of the individual under the arrangement or, if later, 6th April 2006, and

(b)ending immediately before the benefit crystallisation event.

(5)But if benefits ceased to accrue to or in respect of the individual under the arrangement before the benefit crystallisation event, the active membership period is to be treated as having ended then.

(6)This section only applies if notice of intention to rely on it is given to the Inland Revenue in accordance with regulations made by the Board of Inland Revenue.

222Non-residence: money purchase arrangementsU.K.

(1)This section applies in the case of an arrangement that is a money purchase arrangement.

(2)The lifetime allowance enhancement factor is—

(a)if the arrangement is a cash balance arrangement, the cash balance arrangement non-residence factor (see subsections (3) to (5)), and

(b)if the arrangement is any other sort of money purchase arrangement, the other money purchase arrangement non-residence factor (see subsections (6) and (7)).

(3)The cash balance arrangement non-residence factor is—

(a)the factor arrived at by the application of subsection (4) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b)if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of subsection (4) in relation to each of those parts of that period.

(4)The factor arrived at by the application of this subsection in relation to any part of the active membership period is—

(5)For the purposes of subsection (4)—

(a)the closing value of the individual’s rights under the arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of that part of that period, and

(b)the opening value of the individual’s rights under the arrangement is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the beginning of that part of that period.

(6)The other money purchase arrangement non-residence factor is—

(a)the factor arrived at by the application of subsection (7) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b)if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of subsection (7) in relation to each of those parts of that period.

(7)The factor arrived at by the application of this subsection in relation to any part of the active membership period is—

223Non-residence: other arrangementsU.K.

(1)This section applies in the case of an arrangement that is not a money purchase arrangement.

(2)The lifetime allowance enhancement factor is—

(a)if the arrangement is a defined benefits arrangement, the defined benefits arrangement non-residence factor (see subsections (3) and (4)), and

(b)if the arrangement is a hybrid arrangement, the hybrid arrangement non-residence factor (see subsections (5) to (7)).

(3)The defined benefits arrangement non-residence factor is—

(a)the factor arrived at by the application of subsection (4) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b)if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of subsection (4) in relation to each of those parts of that period.

(4)The factor arrived at by the application of this subsection in relation to any part of the active membership period is—

(5)The hybrid arrangement non-residence factor is the greater or greatest of such of—

(a)what would be the cash balance arrangement non-residence factor (under section 222) if the arrangement were a cash balance arrangement,

[F107(aa)what would be the other money purchase arrangement non-residence factor (under that section) if the arrangement were a collective money purchase arrangement,]

(b)what would be the other money purchase arrangement non-residence factor (under that section) if the arrangement were [F108a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement], and

(c)what would be the defined benefits arrangement non-residence factor (under subsections (3) and (4)) if the arrangement were a defined benefits arrangement,

as are relevant factors in relation to the arrangement.

(6)A factor is a relevant factor in relation to a hybrid arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under the arrangement may be benefits linked to that factor.

(7)For that purpose—

(a)cash balance benefits are linked to the cash balance arrangement non-residence factor,

(b)other money purchase benefits are linked to the other money purchase arrangement non-residence factor, and

(c)defined benefits are linked to the defined benefits arrangement non-residence factor.

224Transfers from recognised overseas pension scheme: generalU.K.

(1)This section makes provision for the operation of a lifetime allowance enhancement factor with respect to a benefit crystallisation event occurring in relation to an individual where (at any time after 5th April 2006 but before the benefit crystallisation event) there has been a recognised overseas scheme transfer.

(2)There is a “recognised overseas scheme transfer” if any sums or assets—

(a)held for the purposes of an arrangement under a recognised overseas pension scheme, or

(b)representing accrued rights under such an arrangement,

are transferred so as to become held for the purposes of, or to represent rights under, an arrangement under a registered pension scheme relating to the individual.

(3)The arrangement specified in subsection (2)(a) or (b) is referred to in this section and sections 225 and 226 as the “recognised overseas scheme arrangement”.

(4)The lifetime allowance enhancement factor is the recognised overseas scheme transfer factor.

(5)The recognised overseas scheme transfer factor is—

(6)Section 225 specifies the relevant relievable amount in the case of a recognised overseas scheme arrangement that was a money purchase arrangement; and section 226 specifies the relevant relievable amount in the case of an recognised overseas scheme arrangement that was any other sort of arrangement.

(7)In this section and sections 225 and 226 “overseas arrangement active membership period” is the period—

(a)beginning with the date on which the benefits first began to accrue to or in respect of the individual under the recognised overseas scheme arrangement or, if later, 6th April 2006, and

(b)ending immediately before the recognised overseas scheme transfer.

(8)But if benefits ceased to accrue to or in respect of the individual under the recognised overseas scheme arrangement before the recognised overseas scheme transfer, the overseas arrangement active membership period is to be treated as having ended then.

(9)This section only applies if notice of intention to rely on it is given to the Inland Revenue in accordance with regulations made by the Board of Inland Revenue.

225Overseas scheme transfers: money purchase arrangementsU.K.

(1)This section applies in the case of a recognised overseas scheme arrangement that was a money purchase arrangement.

(2)The relevant relievable amount is—

(a)if the recognised overseas scheme arrangement was a cash balance arrangement, the cash balance relevant relievable amount (see subsections (3) to (5)), and

(b)if the recognised overseas scheme arrangement was any other sort of money purchase arrangement, the other money purchase relevant relievable amount (see subsections (6) and (7)).

(3)The cash balance relevant relievable amount is—

(a)the amount arrived at by the application of subsection (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b)if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of subsection (4) in relation to each of those parts of that period.

(4)The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

(5)For the purposes of subsection (4)—

(a)the closing value of the individual’s rights under the recognised overseas scheme arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of that part of that period, and

(b)the opening value of the individual’s rights under the arrangement is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the beginning of that part of that period.

(6)The other money purchase relevant relievable amount is—

(a)the amount arrived at by the application of subsection (7) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b)if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of subsection (7) in relation to each of those parts of that period.

(7)The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is the amount of the contributions made under the arrangement by or in respect of the individual in any part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual.

226Overseas scheme transfers: other arrangementsU.K.

(1)This section applies in the case of a recognised overseas scheme arrangement that was not a money purchase arrangement.

(2)The relevant relievable amount is—

(a)if the recognised overseas scheme arrangement was a defined benefits arrangement, the defined benefits relevant relievable amount (see subsections (3) and (4)), and

(b)if the recognised overseas scheme arrangement was a hybrid arrangement, the hybrid relevant relievable amount (see subsections (5) to (7)).

(3)The defined benefits relevant relievable amount is—

(a)the amount arrived at by the application of subsection (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b)if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of subsection (4) in relation to each of those parts of that period.

(4)The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

(5)The hybrid relevant relievable amount is the greater or greatest of such of—

(a)what would be the cash balance relevant relievable amount (under section 225) if the recognised overseas scheme arrangement had been a cash balance arrangement,

[F109(aa)what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been a collective money purchase arrangement,]

(b)what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been [F110a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement], and

(c)what would be the defined benefits relevant relievable amount (under subsections (3) and (4)) if that arrangement had been a defined benefits arrangement,

as are relevant to that arrangement.

(6)An amount is relevant to a hybrid arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under the arrangement may be benefits linked to that amount.

(7)For that purpose—

(a)cash balance benefits are linked to the cash balance relevant relievable amount,

(b)other money purchase benefits are linked to the other money purchase relevant relievable amount, and

(c)defined benefits are linked to the defined benefits relevant relievable amount.

Annual allowance chargeU.K.

227Annual allowance chargeU.K.

(1)A charge to income tax, to be known as the annual allowance charge, arises [F111where an individual who is a member of one or more registered pension schemes has a [F112non-zero] chargeable amount for a tax year.]

[F113(1A)The chargeable amount F114... is to be determined in accordance with section 227ZA.]

F115(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F115(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)The annual allowance charge is a charge at the [F116appropriate rate] in respect of [F117the chargeable amount.]

F118. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F119(4A)The appropriate rate is—

(a)the basic rate F120... in relation to so much (if any) of the [F121chargeable amount] as, when added to the individual's reduced net income for the tax year, does not exceed the basic rate limit for the tax year,

(b)the higher rate F122... in relation to so much (if any) of the [F121chargeable amount] as, when so added, exceeds the basic rate limit for the tax year but does not exceed the higher rate limit for the tax year, and

(c)the additional rate F123... in relation to so much (if any) of the [F121chargeable amount] as, when so added, exceeds the higher rate limit for the tax year.

[F124But subsection (4AA) applies in the case of a Scottish taxpayer] [F125and subsection (4AB) applies in the case of a Welsh taxpayer].

[F126(4AA)The appropriate rate for a Scottish taxpayer is—

(a)where the only Scottish rate is the Scottish basic rate (the “SBR”), that rate, or

(b)where there is more than one Scottish rate—

(i)the SBR in relation to so much (if any) of the chargeable amount as, when added to the individual’s reduced net income for the tax year, does not exceed the Scottish basic rate limit (“SBRL”) for the tax year,

(ii)the next highest rate after the SBR in relation to so much (if any) of the chargeable amount as, when so added, exceeds the SBRL for the tax year but does not exceed the rate limit for that rate for the tax year, and

(iii)where applicable, any other higher Scottish rate in relation to so much (if any) of the chargeable amount as, when so added, does not exceed the rate limit for that rate for the tax year.]

[F127(4AB)The appropriate rate for a Welsh taxpayer is—

(a)the Welsh basic rate in relation to so much (if any) of the chargeable amount as, when added to the individual’s reduced net income for the tax year, does not exceed the basic rate limit for the tax year,

(b)the Welsh higher rate in relation to so much (if any) of the chargeable amount as, when so added, exceeds the basic rate limit for the tax year but does not exceed the higher rate limit for the tax year, and

(c)the Welsh additional rate in relation to so much (if any) of the chargeable amount as, when so added, exceeds the higher rate limit for the tax year.]

(4B)The individual's reduced net income for the tax year is the amount after taking Step 3 in section 23 of ITA 2007 in the case of the individual for the tax year.

[F128(4C)Where—

(a)the basic rate limit,

(b)the higher rate limit,

(c)the Scottish basic rate limit, or

(d)any other Scottish rate limit,

is (in accordance with section 192 of this Act or section 414 of ITA 2007) increased in the case of the individual, the references to the limit in subsections (4A) [F129, (4AA) and (4AB)] are to the limit as so increased.]]

(5)[F130The chargeable amount] is not to be treated as income for any purpose of the Tax Acts.

F131(5A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F131(5B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6)The following sections make further provision about the annual allowance charge—

• [F132sections 227ZA and 227B (chargeable amount),]

• [F132sections 227C to 227G (supplemental provision for calculations under section 227B),]

• section 228 (annual allowance),

• section [F133229(1)] (total pension input amount to be aggregate of pension input amounts for pension input periods ending in tax year),

• [F134section 229(2) to (4) (how to arrive at the pension input amount in respect of an arrangement),]

• sections 230 to 237 (pension input amounts),

• [F135sections 237A to 237F (persons liable to charge),] and

• section 238 (pension input period).

(7)Schedule 36 contains (in Part 4) transitional provision about the annual allowance charge.

[F136227ZAThe chargeable amountU.K.

(1)The chargeable amount is the alternative chargeable amount (see section 227B) if—

(a)the year is—

(i)the tax year in which the individual first flexibly accesses pension rights (see section 227G), or

(ii)a tax year later than that tax year,

(b)the money-purchase input sub-total (see section 227C) exceeds [F137£10,000], and

(c)the alternative chargeable amount exceeds the default chargeable amount.

(2)Otherwise, the chargeable amount is the default chargeable amount.

(3)The default chargeable amount is the amount (if any) by which—

(a)the total pension input amount calculated in accordance with section 229(1), exceeds

(b)the annual allowance for the year in the case of the individual (see sections 228(1) and 228A).

[F138(4)If there is no such excess, the default chargeable amount is zero.]]

F139227AIndividuals who meet flexible drawdown conditionsU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F140227BThe alternative chargeable amountU.K.

(1)The alternative chargeable amount is the total of—

(a)the amount (if any) by which the defined-benefit input sub-total exceeds the alternative annual allowance, and

(b)the amount by which the money-purchase input sub-total exceeds [F141£10,000].

F142F143[F144(2)The alternative annual allowance is—

(3)The defined-benefit input sub-total is the total of—

(a)the pension input amounts in respect of each defined benefits arrangement relating to the individual under a registered pension scheme of which the individual is a member (see section 229(2)(c)),

(b)the pension input amounts in respect of each hybrid arrangement—

(i)relating to the individual under a registered pension scheme of which the individual is a member, and

(ii)in respect of which the pension input amount is input amount C mentioned in section 237, and

(c)any amounts required to be included by section F146... 227F(4) or (6) (pension input periods that end in the year [F147and contain] the day on which rights are first flexibly accessed F148...).

(4)Subsection (3)(b) is subject to section 227D (pension input amounts for certain hybrid arrangements).

(5)If, in the case of a hybrid arrangement, input amount C mentioned in section 237—

(a)is a relevant input amount for the purposes of section 237, and

(b)is equal to—

(i)input amount A [F149, AA] or B mentioned in section 237 if that is the only other relevant input amount for the purposes of section 237, or

(ii)the greater [F150or greatest] of input amounts A [F151, AA] and B mentioned in section 237 if [F152at least two of those amounts] are relevant input amounts for the purposes of section 237,

the pension input amount in respect of the arrangement is, for the purposes of subsection (3)(b) and sections 227C(1)(b) and 227D(1)(c), treated as being input amount A [F153, AA] or B or, as the case may be, the greater [F154or greatest] of input amounts A [F153, AA] and B (and, in either case, not input amount C).

227CMeaning of “money-purchase input sub-total”U.K.

(1)The money-purchase input sub-total is the total of—

(a)the pension input amounts in respect of each money purchase arrangement relating to the individual under a registered pension scheme of which the individual is a member (see section 229(2)(a) and (b)), and

(b)the pension input amounts in respect of each hybrid arrangement—

(i)relating to the individual under a registered pension scheme of which the individual is a member, and

(ii)in respect of which the pension input amount is input amount A [F155, AA] or B mentioned in section 237.

(2)Subsection (1) is to be read with—

F156(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)section 227F(2), (3) and (5) (pension input periods that end in the tax year and contain [F157the day on which rights are first flexibly accessed]).

(3)Subsection (1)(b) is to be read with—

(a)section 227B(5) (hybrid arrangements where input amount C is highest-equal input amount), and

(b)section 227D (pension input amounts for certain hybrid arrangements).

227DPension input amounts in respect of certain hybrid arrangementsU.K.

(1)In this section “relevant hybrid arrangement” means a hybrid arrangement—

(a)relating to the individual under a registered pension scheme of which the individual is a member,

(b)made on or after 14 October 2014 or having become a hybrid arrangement (whether or not for the first time) on or after that day, and

(c)in respect of which the pension input amount is input amount C mentioned in section 237.

(2)As respects each relevant hybrid arrangement in the maximising set of relevant hybrid arrangements—

(a)the pension input amount in respect of the arrangement is for the purposes of sections 227B(3)(b) and 227C(1)(b) treated as being not input amount C mentioned in section 237 but, instead, the greater [F158or greatest] of such of input amounts A [F159, AA] and B mentioned in section 237 as are, for the purposes of section 237, relevant input amounts in the case of the arrangement, and

(b)accordingly, the arrangement—

(i)is not to be included among the arrangements mentioned in section 227B(3)(b) whose pension input amounts are totalled under section 227B(3), but

(ii)is to be included among the arrangements mentioned in section 227C(1)(b) whose pension input amounts are totalled under section 227C(1).

(3)For the purposes of subsection (2)—

(a)the maximising set contains no relevant hybrid arrangements,

(b)a particular relevant hybrid arrangement makes up that set, or

(c)two or more particular relevant hybrid arrangements make up that set,

if the alternative chargeable amount with the maximising set so made up is not less than it would be with the maximising set made up in any other way.

(4)In particular, the maximising set may be identified by taking the following steps—

• Step 1 Identify all of the relevant hybrid arrangements.

• Step 2 Identify all of the different combinations of the arrangements identified at Step 1 (including the combination consisting of all of those arrangements, and the combination consisting of none of them, as well as every possible combination of each possible size in between).

• Step 3 For each combination identified at Step 2 calculate what the money-purchase input sub-total would be if each relevant hybrid arrangement in the combination were treated in accordance with the rules in paragraphs (a) and (b) of subsection (2).

• Step 4 If the result of each calculation at Step 3 is less than or equal to [F160£10,000] the chargeable amount is the default chargeable amount.

• Step 5 If the amount calculated at Step 3 for a combination is greater than [F160£10,000] then calculate in accordance with section 227B what the alternative chargeable amount would be if—

  (a)

  each relevant hybrid arrangement in the combination were treated in accordance with the rules in paragraphs (a) and (b) of subsection (2), and

  (b)

  for each relevant hybrid arrangement not in the combination, input amount C mentioned in section 237 were included in the total under section 227B(3).

• Step 6 Identify the highest (or higher) of the amounts calculated at Step 5. The maximising set is made up of each relevant hybrid arrangement in the combination concerned.

(5)Subsection (1)(c) is to be read with section 227B(5) (hybrid arrangements where input amount C is highest-equal input amount).

F161(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F162227EPension input periods ending before rights are first flexibly accessedU.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

227FPension input periods in which rights are first flexibly accessedU.K.

(1)Subject to subsection (7), subsections (2) to (6) apply if, for an arrangement mentioned in section 227C(1), the pension input period ending in the tax year contains the day on which the individual first flexibly accesses pension rights (whether or not that day is in the tax year).

(2)If the arrangement is a cash balance arrangement, the pension input amount in respect of that arrangement is for the purposes of section 227C(1)(a) treated as being—

(3)If the arrangement is a money purchase arrangement other than a cash balance arrangement, the pension input amount in respect of that arrangement is for the purposes of section 227C(1)(a) treated as being the amount in respect of the arrangement that would be arrived at under section 233 for a pension input period—

(a)beginning with the day after that on which the individual first flexibly accesses pension rights, and

(b)ending at the end of the pension input period mentioned in subsection (1).

(4)If the arrangement is a money purchase arrangement, the amount (if any) by which—

(a)the (actual) pension input amount in respect of the arrangement (see section 229(2)(a) or (b)), exceeds

(b)the amount treated by subsection (2) or (3) as being the pension input amount in respect of the arrangement,

is required to be included in the defined-benefit input sub-total calculated under section 227B(3).

(5)If the arrangement is a hybrid arrangement—

(a)input amount A mentioned in section 237 is for the purposes of sections 227C(1)(b) and 227D(2) treated as being—

(b)input amount [F163AA or] B mentioned in section 237 is for the purposes of sections 227C(1)(b) and 227D(2) treated as being the amount for the arrangement that would be arrived at under section 233 for a pension input period—

(i)beginning on the day after that on which the individual first flexibly accesses pension rights, and

(ii)ending at the end of the pension input period mentioned in subsection (1).

(6)If the arrangement is a hybrid arrangement, the amount (if any) by which—

(a)the (actual) pension input amount in respect of the arrangement (see section 229(2)(d)), exceeds

(b)the amount which, in accordance with subsection (5) and section 227D, is for the purposes of section 227C(1)(b) the pension input amount in respect of the arrangement,

is required to be included in the defined-benefit input sub-total calculated under section 227B(3).

(7)Subsections (2) to (6) do not apply if section 165(3A) applied in the individual's case to the arrangement, or any other arrangement, at any time before 6 April 2015.

227GWhen pension rights are first flexibly accessedU.K.

(1)References in sections 227B to 227F to when the individual first flexibly accesses pension rights are to the time, or the earlier or earliest of the times, given for that by the following subsections.

(2)If—

(a)the individual has a member's flexi-access drawdown fund in respect of an arrangement, and

(b)the fund came into being—

(i)as a result of sums or assets being designated on or after 6 April 2015 as available for the payment of drawdown pension, or

(ii)as a result of the operation of paragraph 8D(2) of Schedule 28,

the individual first flexibly accesses pension rights immediately before the first qualifying payment is made from the fund (see subsection (10)).

(3)If section 165(3A) applied in the individual's case to an arrangement at any time before 6 April 2015, the individual first flexibly accesses pension rights at the start of 6 April 2015.

(4)If—

(a)the individual has a member's drawdown pension fund in respect of an arrangement, and

(b)the sums and assets that make up the fund become newly-designated funds by the operation of paragraph 8B of Schedule 28,

the individual first flexibly accesses pension rights immediately before the first qualifying payment (see subsection (10)) is made from the individual's member's flexi-access drawdown fund in respect of the arrangement (whether that is the payment that triggers the operation of paragraph 8B of Schedule 28 or a subsequent payment).

(5)If—

(a)the individual has a member's drawdown pension fund in respect of an arrangement, and

(b)the sums and assets that make up the fund become newly-designated funds by the operation of paragraph 8C of Schedule 28,

the individual first flexibly accesses pension rights immediately before the first qualifying payment is made from the individual's member's flexi-access drawdown fund in respect of the arrangement (see subsection (10)).

(6)The individual first flexibly accesses pension rights immediately before the payment of the first uncrystallised funds pension lump sum paid to the individual.

(7)If the individual is entitled to payment of a lifetime annuity under a flexible annuity contract (see subsection (8)), the individual first flexibly accesses pension rights immediately before the first payment of the annuity is made.

(8)In subsection (7) “flexible annuity contract” means a contract for a lifetime annuity where—

(a)the annuity is within paragraph 3(1A) of Schedule 28, and

(b)the terms of the contract are such that there will or could be decreases in the amount of the annuity other than decreases from time to time allowed by regulations under paragraph 3(1)(d) of Schedule 28 (and any such regulations are to be treated as having effect for this purpose).

(9)If—

(a)the individual is entitled to payment of a scheme pension under a [F164relevant] arrangement under a registered pension scheme,

(b)the individual became entitled to the scheme pension—

(i)on or after 6 April 2015, and

(ii)at a time when fewer than 11 other individuals were entitled to the present payment of a scheme pension, or dependants' scheme pension, under the registered pension scheme, and

(c)the scheme pension is not payable under an annuity contract treated under section 153(8) or (8A) as having become a registered pension scheme,

the individual first flexibly accesses pension rights immediately before the first payment of the scheme pension is made.

[F165(9A)In subsection (9), “relevant arrangement” means a money purchase arrangement that is not a collective money purchase arrangement.]

(10)In subsections (2), (4) and (5), a reference to a qualifying payment from a fund is a reference to—

(a)payment of income withdrawal from the fund, or

(b)payment of a short-term annuity purchased using sums or assets out of the fund,

but does not include payment at a time when the whole of the fund represents rights attributable to a disqualifying pension credit.

(11)In subsection (10) “disqualifying pension credit” is to be read in accordance with paragraph 2(3) and (4) of Schedule 29.]

[F166228Annual allowanceU.K.

[F167(1)The annual allowance for the tax year 2023-24 and, subject to subsection (2), each subsequent tax year is £60,000.]

(2)The Treasury may by order provide that the annual allowance for any tax year subsequent to the tax year [F1682023-24] is such amount as is specified in the order.]

[F169228ZATapered reduction of annual allowance: high-income individualU.K.

F170[F171(1)If the individual is a high-income individual for the tax year, the amount of the annual allowance for the tax year in the case of the individual is the amount specified for the tax year by or under section 228 reduced (but not below [F172£10,000]) by—

(2)If the amount of the reduction under subsection (1) would otherwise not be a multiple of £1, it is to be rounded down to the nearest amount which is a multiple of £1.

(3)The individual is a “high-income individual” for the tax year if—

(a)the individual's adjusted income for the tax year is more than [F173£260,000] and

(b)the individual's threshold income for the tax year is more than the amount given by [F174[F175£260,000] minus the amount specified for the tax year by or under section 228].

(4)The individual's “adjusted income” for the tax year is—

(a)the individual's net income for the year (see Step 2 of the calculation in section 23 of ITA 2007), plus

(b)the amount of any relief under section 193(4) or 194(1) deducted at that Step, plus

(c)the amount of any deductions made from employment income of the individual for the year—

(i)under section 193(2), or

(ii)under Chapter 2 of Part 5 of ITEPA 2003 in accordance with paragraph 51(2) of Schedule 36, plus

(d)an amount equal to—

(i)the total pension input amount calculated in accordance with section 229(1), less

(ii)the amount of any contributions paid by or on behalf of the individual during the year under registered pension schemes of which the individual is a member, less

(e)the amount of any lump sum which accrues in the year and in relation to which section 579A of ITEPA 2003 is applied by section 636A(4ZA) of ITEPA 2003.

(5)The individual's “threshold income” for the tax year is—

(a)the individual's net income for the year (see Step 2 of the calculation in section 23 of ITA 2007), plus

(b)any amount by which what would otherwise be general earnings or specific employment income of the individual for the year has been reduced by relevant salary sacrifice arrangements or relevant flexible remuneration arrangements, less

(c)the amount (before any deduction under section 192(1)) of any contribution paid in the year in respect of which the individual is entitled to be given relief under section 192 (relief at source), less

(d)the amount of any lump sum which accrues in the year and in relation to which section 579A of ITEPA 2003 is applied by section 636A(4ZA) of ITEPA 2003.

(6)In subsection (5)—

• “relevant salary sacrifice arrangements” means arrangements—

  (a)

  under which the individual gives up the right to receive general earnings or specific employment income in return for the making of relevant pension provision, and

  (b)

  which are made on or after 9 July 2015 (and whether before or after the start of the employment concerned), and

• “relevant flexible remuneration arrangements” means arrangements—

  (a)

  under which the individual and an employer of the individual agree that relevant pension provision is to be made rather than the individual receive some description of employment income, and

  (b)

  which are made on or after 9 July 2015 (and whether before or after the start of the employment concerned).

(7)In subsection (6) “relevant pension provision” means the payment of contributions (or additional contributions) to a pension scheme in respect of the individual or otherwise (by an employer of the individual or any other person) to secure an increase in the amount of the benefits to which the individual or any person who is a dependant of, or is connected with, the individual is actually or prospectively entitled under a pension scheme.

(8)In subsection (7) “increase” includes increase from nil.

(9)Section 993 of ITA 2007 (meaning of “connected” persons) applies for the purposes of subsection (7).

228ZBAnti-avoidance in connection with section 228ZAU.K.

(1)Subsection (5) applies if there are arrangements in respect of which conditions A to C are met.

(2)Condition A is that it is reasonable to assume that the main purpose, or one of the main purposes, of the arrangements is to reduce the amount of the reduction under section 228ZA(1) in the individual's case—

(a)for the tax year, or

(b)for two or more tax years which include the tax year.

(3)Condition B is that the arrangements involve either or both of the following—

(a)reducing the individual's adjusted income for the tax year, and

(b)reducing the individual's threshold income for the tax year.

(4)Condition C is that the arrangements involve the reduction within subsection (3), or any of the reductions within subsection (3), being redressed by an increase in the individual's adjusted income, or threshold income, for a different tax year.

(5)The reduction under section 228ZA(1) in the individual's case for the tax year is to be treated as being what it would be apart from the arrangements.

(6)In subsection (2) “reduce” includes reduce to nil.

(7)The increase mentioned in subsection (4) may be an increase in what would be the individual's adjusted income, or threshold income, for the tax year 2015-16 if section 228ZA—

(a)had effect for that year, and

(b)did so as if the total pension input amount mentioned in section 228ZA(4)(d)(i) were the sum of the total pension input amounts for the pre-alignment and post-alignment tax years (see section 228C(2)).

(8)In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

[F176228ACarry forward of unused annual allowanceU.K.

(1)This section applies if the individual has unused annual allowance available for the tax year (“the current tax year”).

(2)The annual allowance for the current tax year in the case of the individual is to be treated as increased by the amount of the unused annual allowance available for the current tax year.

(3)The individual has unused annual allowance available for the current tax year if—

(a)the amount of the annual allowance (before any increase under this section) for the immediately preceding tax year exceeded the total pension input amount in the case of the individual for that tax year, or

(b)the amount of the annual allowance (before any such increase) for either or both of the two tax years immediately preceding that immediately preceding tax year exceeded the total pension input amount in the case of the individual for the tax year concerned and the excess (or, where there is an excess for both of those tax years, the excess for both tax years) has not been used up,

or both.

(4)Subsection (3)—

(a)does not apply in relation to a tax year preceding the current tax year unless the individual was a member of a registered pension scheme at some time during that tax year, but

(b)subject to that, applies in relation to such a tax year even if the total pension input amount in the case of the individual for that tax year was nil (in which case the excess within paragraph (a) or (b) of that subsection is the whole amount of the annual allowance before any increase under this section).

(5)The amount of the unused annual allowance available for the current tax year is the aggregate of—

(a)any excess within subsection (3)(a), and

(b)so much of any excess within subsection (3)(b) as has not been used up.

(6)An amount of an excess within subsection (3)(b) for a tax year has been “used up” if—

(a)for a tax year falling between that tax year and the current tax year (an “intervening tax year”), the total pension input amount in the case of the individual exceeded the annual allowance (apart from any increase under this section), and

(b)the amount of the excess had effect by virtue of this section to reduce (or eliminate) the annual allowance charge for the intervening tax year in the case of the individual.

(7)In calculating for the purposes of subsection (6) the amount of which of the excesses for different tax years had effect to reduce or eliminate the annual allowance charge for an intervening tax year, an amount of the excess for an earlier tax year is to be taken to have done so before that for a later tax year.

[F177(8)If, for a tax year preceding the current tax year, the chargeable amount in the individual's case was the alternative chargeable amount—

(a)a reference in subsection (3)(a) or (b), (4)(b) or (6)(a) to the annual allowance for that preceding tax year is a reference to the alternative annual allowance for that preceding tax year (see section 227B(2)), and

(b)a reference in subsection (3)(a) or (b), (4)(b) or (6)(a) to the total pension input amount in the case of the individual for that preceding tax year is a reference to the defined-benefit input sub-total in the case of the individual for that preceding tax year (see section 227B(3) to (5)).

(9)Subsection (3) does not apply in relation to a tax year—

(a)preceding the current tax year, and

(b)ending not later than 5 April 2015,

if, at any time in that preceding tax year, section 165(3A) or 167(2A) applied to an arrangement relating to the individual.]]

[F178228BCarry forward: certain periods treated as pension input periodsU.K.

(1)This section applies where the first pension input period for a relevant arrangement relating to an individual ends in the tax year 2011-12, 2012-13 or 2013-14.

(2)A period is a “carry forward period” for the purposes of this section if it—

(a)is one of the 3 consecutive periods of 12 months immediately before the commencement date of the first pension input period, and

(b)is a period in which the arrangement was in existence at any time.

(3)Any amount that would, if a carry forward period were a pension input period of the arrangement, have been unused annual allowance available to the individual for the tax year 2011-12, 2012-13 or 2013-14 is to be treated as unused annual allowance available to the individual for that tax year.

(4)In this section “relevant arrangement” means—

(a)a cash balance arrangement,

(b)a defined benefits arrangement, or

(c)a hybrid arrangement the only benefits under which may be cash balance benefits or defined benefits.]

[F179228CAnnual allowance for, and carry-forward from, 2015-16U.K.

(1)The provisions relating to the annual allowance charge (whether provisions contained in or made under this or any other Act) have effect subject to the following rules.

2015-16 split into two tax years for annual allowance purposes

(2)For the purposes of those provisions but subject to subsection (3), the tax year 2015-16 is to be treated as consisting of two tax years as follows—

(a)one beginning with 6 April 2015 and ending with 8 July 2015 (“the pre-alignment tax year”), and

(b)one beginning with 9 July 2015 and ending with 5 April 2016 (“the post-alignment tax year”).

(3)Despite subsection (2)—

(a)separate annual allowance charges for each of the pre-alignment and post-alignment tax years cannot arise, but a single annual allowance charge for the tax year 2015-16 arises if the individual has a chargeable amount for either or each of the pre-alignment and post-alignment tax years, and

(b)that single annual allowance charge is calculated as if—

(i)in section 227(4) the reference to the chargeable amount were a reference to the sum of the chargeable amounts for the pre-alignment and post-alignment tax years, and

(ii)in section 227(4A) to (4C) each reference to the tax year were to the tax year 2015-16.

Double allowances allocated to earlier part of 2015-16

(4)For the pre-alignment tax year—

(a)the amount specified in section 228(1) (annual allowance for tax year) is treated as being £80,000, and

(b)in each of sections 227ZA(1)(b) and 227B(1)(b) and (2), the reference to £10,000 is treated as a reference to £20,000.

Allowances for later part of 2015-16 limited to carried-forward allowances

(5)Where the individual was a member of a registered pension scheme at some time in the pre-alignment tax year then, for the post-alignment tax year—

(a)the amount specified in section 228(1) is treated as being nil,

(b)section 227B(2) (amount of alternative annual allowance) has effect as if “AA” were substituted for “AA – £10,000”,

(c)if the chargeable amount in the individual's case for the pre-alignment tax year is the alternative chargeable amount, the reference to £10,000 in each of sections 227ZA(1)(b) and 227B(1)(b) is treated as being a reference to nil, and

(d)if the chargeable amount in the individual's case for the pre-alignment tax year is the default chargeable amount, the reference to £10,000 in each of sections 227ZA(1)(b) and 227B(1)(b) is treated as being a reference—

(i)to nil where the money-purchase input sub-total in the individual's case for the pre-alignment tax year is £20,000 or more, or

(ii)to the amount equal to £20,000 minus that sub-total where that sub-total is more than £10,000 but less than £20,000.

Limit on carry-forward of unused allowances from earlier part of 2015-16

(6)Where the current tax year for the purposes of section 228A (carry-forward of annual allowance) is the post-alignment tax year—

(a)if—

(i)the chargeable amount in the individual's case for the pre-alignment tax year is the default chargeable amount, and

(ii)the excess mentioned in section 228A(5)(a) would otherwise be more than £40,000,

that excess is treated as being £40,000, and

(b)if—

(i)the chargeable amount in the individual's case for the pre-alignment tax year is the alternative chargeable amount, and

(ii)the excess mentioned in section 228A(5)(a) would otherwise be more than £30,000,

that excess is treated as being £30,000.

Further provisions about carry-forward of unused allowances

(7)Where the current tax year for the purposes of section 228A is the post-alignment tax year or the tax year 2016-17, 2017-18 or 2018-19, section 228A applies in relation to that current tax year as if in section 228A(3)(b)—

(a)for “either or both of the two” there were substituted “ any one or more of the three ”, and

(b)for “(or, where there is an excess for both of those tax years, the excess for both tax years)” there were substituted “ (or, where there is an excess for two or all three of those tax years, the excess for both or all those tax years) ”.

(8)Where the current tax year for the purposes of section 228A is the tax year 2016-17, 2017-18 or 2018-19—

(a)if—

(i)the chargeable amount in the individual's case for the pre-alignment tax year is the default chargeable amount, and

(ii)the excess within section 228A(3)(b) in the case of the pre-alignment tax year would otherwise be more than £40,000,

that excess is treated as being £40,000 (and accordingly the amount aggregated under section 228A(5) in respect of that excess is so much of the £40,000 as has not been used up),

(b)if—

(i)the chargeable amount in the individual's case for the pre-alignment tax year is the alternative chargeable amount, and

(ii)the excess within section 228A(3)(b) in the case of the pre-alignment year would otherwise be more than £30,000,

that excess is treated as being £30,000 (and accordingly the amount aggregated under section 228A(5) in respect of that excess is so much of the £30,000 as has not been used up), and

(c)in calculating for the purposes of section 228A(6) the amount of which of the excesses for different tax years had effect to reduce or eliminate the annual allowance charge for the post-alignment tax year, the amount of the excess for the pre-alignment tax year is to be taken to have done so before that for any other tax year and, subject to that, the amount of the excess for an earlier tax year is to be taken to have done so before that for a later year.

Supplementary provision

(9)For the pre-alignment tax year, section 229(3) applies as if the reference to the end of the tax year were a reference to the end of the post-alignment tax year.]

229Total pension input amountU.K.

(1)The total pension input amount is arrived at by aggregating the pension input amounts in respect of each arrangement relating to the individual under a registered pension scheme of which the individual is a member.

(2)The pension input amount in respect of an arrangement—

(a)is the amount arrived at under sections 230 to 232 if it is a cash balance arrangement,

(b)is the amount arrived at under section 233 if it is any other sort of money purchase arrangement,

(c)is the amount arrived at under sections 234 to [F180236A] if it is a defined benefits arrangement, and

(d)is the amount arrived at under section 237 if it is a hybrid arrangement.

(3)But there is no pension input amount in respect of an arrangement if, before the end of the tax year, the individual—

[F181(a)satisfies the severe ill-health condition, or]

(b)has died.

[F182(4)For the purposes of subsection (3)(a) the individual satisfies the severe ill-health condition if the individual—

(a)becomes entitled to all the benefits to which the individual is entitled under the arrangement in consequence of the scheme administrator having received evidence from a registered medical practitioner that the individual is suffering from ill-health which makes the individual unlikely to be able (otherwise than to an insignificant extent) to undertake gainful work (in any capacity) before reaching pensionable age,

(b)becomes entitled to a serious ill-health lump sum under the arrangement, or

(c)is a member of the armed forces of the Crown who becomes entitled under the arrangement to a benefit on which no liability to income tax arises by virtue of section 641(1) of ITEPA 2003.]

[F183(5)Subsection (2) is subject to section 237ZA (calculation of pension input amounts for input periods ending in 2015-16).]

230Cash balance arrangementsU.K.

(1)The pension input amount in respect of a cash balance arrangement is the amount of any increase in the value of the individual’s rights under the arrangement during the pension input period of the arrangement that ends in the tax year.

(2)There is an increase in the value of the individual’s rights under the arrangement during the pension input period if—

(a)the opening value of the individual’s rights under the arrangement, is exceeded by

(b)the closing value of the individual’s rights under the arrangement.

(3)The amount of the increase in the value of the individual’s rights under the arrangement during the pension input period is the amount of that excess.

[F184(4)The opening value of the individual’s rights under the arrangement—

(a)where the pension input period is the first pension input period of the arrangement, is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits immediately before that pension input period (or is nil if no such amount would be available), or

(b)in any other case, is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of the immediately preceding pension input period.]

(5)The closing value of the individual’s rights under the arrangement is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of the pension input period.

[F185(5A)If, during the pension input period, minimum payments are made under—

(a)section 8 of the Pension Schemes Act 1993, or

(b)section 4 of the Pension Schemes (Northern Ireland) Act 1993,

in relation to the individual in connection with the arrangement, their amount is to be subtracted from what would otherwise be the pension input amount in the case of the individual in respect of the arrangement.

[F186(5B)The pension input amount in respect of the cash balance arrangement is nil where subsection (5BA) or (5BB) applies and the value of the relevant rights of the individual under the arrangement does not increase during the pension input period by more than—

(a)the relevant percentage, plus

(b)the relevant statutory increase percentage.

(5BA)This subsection applies where the individual—

(a)is, throughout the pension input period, a deferred member of the pension scheme that the arrangement is under,

(b)is such a deferred member for part of the pension input period and a pensioner member for the rest of it, or

(c)would meet the condition in paragraph (a) or (b) if the arrangement were the only arrangement under the pension scheme relating to that individual.

(5BB)This subsection applies where—

(a)during the pension input period all the sums or assets held for the purposes of, or representing accrued rights under, the arrangement are transferred so as to become held for the purposes of, or to represent rights under—

(i)a registered pension scheme, or

(ii)a qualifying recognised overseas pension scheme,

in connection with the individual,

(b)the individual is a deferred member of the pension scheme that the arrangement is under from the beginning of the pension input period until the transfer (or would be if the arrangement were the only arrangement under the pension scheme relating to that individual), and

(c)rights do not accrue under the arrangement to or in respect of the individual during so much of the pension input period as falls after the transfer.

(5BC)In determining for the purposes of this section whether or not a member of a pension scheme is a deferred member (see particularly the definition of “active member” in section 151(2)), arrangements made under the pension scheme for benefits to accrue, as a consequence of (and immediately after) a relevant inward transfer (as defined in section 232(6)) to or in respect of that member, are to be disregarded—

(a)if condition B in section 232(6A) is met in relation to the accrual of benefits under the arrangements, or

(b)so far as the accrual of benefits under the arrangements is to be an increase in the rights of the individual which falls to be subtracted by virtue of section 232(6A)(b).]

(5C)In this section—

• “guaranteed minimum pension” has the meaning given by—

  (a)

  section 8(2) of the Pension Schemes Act 1993, or

  (b)

  section 4(2) of the Pension Schemes (Northern Ireland) Act 1993;

• “predecessor arrangement”, in relation to an arrangement, means another arrangement (under the same or another registered pension scheme) from which some or all of the sums or assets held for the purposes of the arrangement directly or indirectly derive;

• “predecessor registered pension scheme”, in relation to a pension scheme, means another registered pension scheme from which some or all of the sums or assets held for the purposes of the arrangement under the pension scheme directly or indirectly derive;

• [F187“the relevant percentage” means—

  (a)

  where throughout the pension input period the arrangement (or a predecessor arrangement) includes provision for the value of the relevant rights of the individual to increase at an annual rate which is an RPI-related rate specified in the rules of the pension scheme (or a predecessor registered pension scheme) on 6th April 2012, that rate,

  (b)

  where throughout the pension input period the arrangement (or a predecessor arrangement) includes provision for the value of the relevant rights of the individual to increase at an annual rate, other than an RPI-related rate, specified in the rules of the pension scheme (or a predecessor registered pension scheme) on 14th October 2010, that rate, and

  (c)

  in a case not falling within paragraph (a) or (b), the percentage by which the consumer prices index for a month falling within the pension input period and nominated by the scheme administrator is higher than it was for the same month in the previous period of 12 months (or nil per cent if it is not higher);]

• “the relevant rights of the individual” means rights of the individual under the arrangement, other than any rights to a guaranteed minimum pension;

• [F188“the relevant statutory increase percentage” in relation to a pension input period means the percentage increase in the value of the individual’s rights under the arrangement during the pension input period so far as it is attributable solely to one or more of the following—

  (a)

  an increase in accordance with section 15 of the Pension Schemes Act 1993 or section 11 of the Pension Schemes (Northern Ireland) Act 1993 (increase of guaranteed minimum where commencement of guaranteed minimum pension postponed);

  (b)

  a revaluation in accordance with section 16 of the Pension Schemes Act 1993 or section 12 of the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of earning factors);

  (c)

  a revaluation in accordance with Chapter 2 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of accrued benefits);

  (d)

  a revaluation in accordance with Chapter 3 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: protection of increases in guaranteed minimum pensions);

  (e)

  the application of section 67 of the Equality Act 2010 (sex equality rule for occupational pension schemes);

• “RPI-related rate” (in the definition of “the relevant percentage”) means—

  (a)

  a rate produced solely by movement in the retail prices index, or

  (b)

  a rate which (however expressed) is the lower of such a rate and a percentage figure;]

• “specified”, in relation to an annual rate, means specified as a percentage figure or as a percentage produced by movement in an index (or a combination of the two) but does not include a percentage produced by the exercise of a discretion by any person.]

(6)Section 231 (uprating of opening value) and section 232 (adjustments of closing value) supplement this section.

231Cash balance arrangements: uprating of opening valueU.K.

(1)This section applies for adjusting the opening value of the individual’s rights as calculated under section 230(4).

(2)The opening value is to be increased by the appropriate percentage.

[F189(3)The appropriate percentage is the percentage (if any) by which the consumer prices index for the September before the start of the tax year is higher than it was for the previous September.]

232Cash balance arrangements: adjustments of closing valueU.K.

(1)This section applies for adjusting the closing value of the individual’s rights under the arrangement as calculated under section 230(5).

(2)If, during the pension input period, the rights of the individual under the arrangement have been reduced by having become subject to a pension debit, the amount of [F190the reduction] is to be added.

(3)If, during the pension input period, the rights of the individual under the arrangement have been increased by the individual having become entitled to a pension credit deriving from the same or another registered pension scheme, the amount of [F191the increase] is to be subtracted.

(4)[F192In subsection (4A) “relevant outward transfer” means] [F193a transfer relating to the individual of any sums or assets] held for the purposes of, or representing accrued rights under, the arrangement so as to become held for the purposes of, or to represent rights under, any F194... pension scheme that is—