PSI4.2.1 - Tax Relief: Background

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

Our requirements in relation to employee contributions were fundamentally altered by the Finance (No 2) Act 1987. Until 5 April 1987, relief was available only in respect of an employee's ordinary annual contribution (OAC) to an exempt approved scheme. The meaning of an OAC was not defined under the 1970 legislation but was interpreted and set out in the 1979 edition of PN as a "fixed amount, or a varying one calculated as a percentage of earnings or some other stated basis, which is payable each year until NRD or completion of maximum reckonable service". The definition was closely modelled on an Old Code definition based on Regulation 5, SR & O 1921, No 1699. Thus, it was our concern to ensure that scheme documentation was drafted on the basis that employee contributions could be regarded as OACs. You will still see this in existing scheme rules.

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