EIM15040 - Non-approved and employer-financed retirement benefits schemes: contributions made by employer

Section 386 ITEPA 2003

(see EIM15010).

For information about an employee's contributions see EIM15051.

An employer's contribution to a non-approved retirement benefits scheme counts as employment income (see EIM00512) of an employee to the extent that the contribution is made with a view to the provision of relevant benefits (as defined at EIM15020) for that employee or others (see EIM15035). See example EIM15420. Separately identifiable costs incurred by an employer in setting up or administering a scheme are not chargeable on employees under Section 386 ITEPA 2003 as such costs cannot fund the provision of benefits.

If the employer's contribution covers benefits for more than one employee it is apportioned among the employees in accordance with the separate benefits to be provided for each of them, see example EIM15420.

The contribution is treated as income of the tax year in which that contribution is paid, see EIM15038.

Contributions by an employer will nearly always be in cash. In Irving v HMRC ([2008] EWCA Civ.6) the Court of Appeal dismissed the taxpayer’s appeal and supported the view of both the Special Commissioners and the High Court that contributions by an employer may be made in non-cash form i.e. by the transfer of assets. If the contribution is made by transfer of assets from the employer, the contribution is the market value of the asset at the time of transfer.

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

There are some exceptions to the charge, see EIM15050.

(If for any reason any employer contributions are not so charged, make a note in the employee's permanent notes sub-file or computer record historical notes. Any lump sum benefit subsequently paid to the employee that is attributable to such contributions is chargeable to tax when received: see EIM15100.)