Schedule 4 | Pensions: annual allowance

PART 1Alignment of pension input periods with tax years

(1)Part 4 of FA 2004 is amended as follows.

(2)In section 238 (pension input periods)—

(a)in the title, after “period” insert “ : arrangement commencing before 9 July 2015 ”, and

(b)in subsection (1), after “In the case of an arrangement under a registered pension scheme” insert “ where the relevant commencement date is before 9 July 2015, but subject to section 238ZA, ”.

(3)After section 238 insert—

238ZAPension input periods from 9 July 2015 for existing arrangement

(1)If the relevant commencement date in the case of an arrangement under a registered pension scheme is before 9 July 2015, section 238(1) and (3) to (6) apply in relation to the arrangement subject to the following.

(2)If a pension input period for the arrangement—

(a)begins with 8 July 2015 or an earlier day, and

(b)but for this subsection would end with 9 July 2015 or a later day,

it ends with 8 July 2015.

(3)If a pension input period for the arrangement ends with 8 July 2015 (whether or not because of subsection (2)), the subsequent pension input periods for the arrangement are—

(a)the period beginning with 9 July 2015 and ending with 5 April 2016, and

(b)the tax year 2016-17 and each subsequent tax year.

(4)No nominations for the purposes of section 238(3) may be made on or after 9 July 2015.

(5)“The relevant commencement date” has the meaning given by section 238(2).

238ZBPension input periods for arrangement commencing after 8 July 2015

(1)In the case of an arrangement under a registered pension scheme where the relevant commencement date is 9 July 2015 or later, the following are pension input periods—

(a)the period beginning with the relevant commencement date and ending with the first 5 April after the relevant commencement date (or, if the relevant commencement date is itself 5 April, that date), and

(b)each tax year beginning after the end of that period.

(2)“The relevant commencement date” has the meaning given by section 238(2).

(3)Once the individual has become entitled to all the benefits which may be provided to the individual under the arrangement, the last pension input period in the case of the arrangement is that in which that was first so.

(1)Omit section 227E (pension input periods ending in, but before the end of, a tax year).

(2)In consequence—

(a)in section 227B(3)(c) (amounts required to be included by section 227E(3) etc)—

(i)omit “227E(3) or”,

(ii)for “but before” substitute “ and contain ”, and

(iii)omit “or that end in the year and contain that day”,

(b)in section 227C(2) omit paragraph (a) (which refers to section 227E(2)) and the “and” following it,

(c)in section 227C(2)(b), for “that day” substitute “ the day on which rights are first flexibly accessed ”, and

(d)omit section 227D(6) (cases where section 227E(2) applies).

(3)The amendments made by this paragraph have effect for the post-alignment tax year (see the section 228C(2) inserted by this Schedule) and subsequent tax years.

(5)In section 280(2) (index of defined expressions), in the entry for “pension input period”, for “section 238” substitute “ sections 238 to 238ZB ”.

PART 2Annual allowance for, and carry-forward from, 2015-16

(6)In Part 4 of FA 2004, after section 228B insert—

228CAnnual allowance for, and carry-forward from, 2015-16

(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.

PART 3Calculation of pension input amounts for periods ending in 2015-16

(7)Part 4 of FA 2004 is amended as follows.

(8)In section 229 (total pension input amount), after subsection (4) insert—

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

(9)After section 237 insert—

237ZAPension input amounts for input periods ending in 2015-16

(1)This section applies where the tax year is the pre-alignment tax year or the post-alignment tax year (see section 228C(2)).

PART 4Reduction of annual allowance for high-income individuals

(1)In Part 4 of FA 2004, after section 228 insert—

228ZATapered reduction of annual allowance: high-income individual

(1)If the individual is a high-income individual for the tax year, section 228(1) has effect for the tax year in the individual's case as if the amount (“A”) which it specifies for the tax year were reduced (but not below £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 £150,000, and

(b)the individual's threshold income for the tax year is more than the amount given by £150,000 minus A.

(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 228ZA

(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).

(2)The amendment made by sub-paragraph (1) has effect for the tax year 2016-17 and subsequent tax years.

PART 5Other amendments

(1)Part 4 of FA 2004 is amended as follows.

(2)In section 227 (annual allowance charge)—

(a)in subsection (1) (charge arises if individual has a chargeable amount) after “has a” insert “ non-zero ”, and

(b)in subsection (1A) (determination of chargeable amount (if any)) omit “(if any)”.

(3)In section 227ZA (the chargeable amount) after subsection (3) insert—

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

(4)The amendments made by this paragraph have effect for the tax year 2015-16 and subsequent tax years.