EIM15055 - Employer-financed retirement benefits schemes: persons chargeable and residence rules

Section 394 ITEPA 2003

It is common for an employer-financed retirement benefits scheme to provide benefits for people other than an employee. The payment of a lump sum or pension to the surviving spouse of an employee who dies in service would be a typical example.

Where a “relevant benefit” (see EIM15021) is paid out of an employer-financed retirement benefits scheme:

• if the recipient is an individual, the benefit counts as employment income of that individual under Section 394(1) ITEPA 2003 (see EIM00512)
• if the recipient is not an individual (for example, a company or club), the “responsible person” is assessed to income tax (Section 687 IT(TOI)A 2005). See EIM15056 for the definition of “responsible person” and EIM15020 for the definition of d “employer-financed retirement benefits scheme”.

The residence rules found in Chapters 4 and 5 Part 2 ITEPA 2003 (see EIM40001) do not apply to a charge under Section 394 ITEPA 2003. That is because such a charge is classified as “specific employment income” by Section 7(4) ITEPA 2003 and those Chapters are not applicable to such income (Section 6(3) ITEPA 2003). A charge arises where there is either a person or a source of income in the UK.

For the year of assessment, see EIM15058.