PSI17.1.7 - Tax Treatment of Approved Schemes and Payments by Approved Schemes: Tax Treatment of Approved Schemes - Pension Business

(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)

[PN17.13]

The funds of self-administered schemes are directly invested by the trustees who can claim the tax reliefs under section 592 ICTA 1988 on the income and gains arising on those investments. Schemes which pay premiums on insurance policies have no rights of ownership to the assets which underlie the policies and an insured scheme must therefore get its tax relief on investment income in some other way. Equality of treatment is achieved by permitting Life Offices to refer premiums paid by exempt approved schemes to pension business. Section 438 ICTA 1988 provides exemption from corporation tax on the income and chargeable gains from that part of an insurance company’s life assurance fund that is referable to pension business. This enables the Life Office to charge lower premiums for its pension business in comparison with similar policies relating to its general business.

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