RPSM13101120 - Technical Pages: International: Migrant member relief: Transitional relief for employers

Transitional relief for employers

Transitional relief is available to employers for contributions made by them at any time after 5 April 2006 if the following conditions are met:

1. HMRC allowed contributions made by an employer between 1 April 2005 and 5 April 2006 to an overseas pension scheme for the benefit of an employee to be deducted in accordance with section 76(6A) and 76(6C) of Finance Act 1989:-

2. the employer makes contributions to the same pension scheme for the benefit of the same employee,
   
   
3. the scheme manager provides HMRC with the same information about the employee's benefit crystallisation events as would be required if the individual was a relevant migrant member of a qualifying overseas pension scheme (see RPSM13101060), and
   
   
4. HMRC is satisfied that the scheme corresponds to a UK registered pension scheme.

The condition at b will be met if after 5 April 2006 there has been a block transfer involving the transfer of the employee's rights from the overseas pension scheme at a to the overseas pension scheme to which that employer is contributing at any time after 5 April 2006. This is to enable an employer to continue receiving relief if the employee has to transfer to a new overseas pension scheme because of a company take-over or reorganisation.

A scheme that was regarded by HMRC as corresponding to an approved pension scheme immediately before 6 April 2006 will meet the condition at d providing that any rule changes made after 5 April 2006 (but not the aspects of the scheme's rules that have not changed) meet the test of corresponding to a registered scheme. Scheme managers do not have to apply to HMRC to determine whether or not that test is met where such a rule change is made. However, they should notify HMRC of rule changes.

If the transitional relief conditions are met, article 15 of The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - provides for the contributions to be treated as if they were relevant migrant member contributions (see RPSM13101030). Contributions are allowed as deductions under section 196 to the extent that they are paid and would be allowable under the normal rules of Schedule D or under section 75 or 76 Income and Corporation Taxes Act (ICTA) 1988 (see RPSM05102010). Section 200 applies to such contributions as if the reference there to contributions under a registered pension scheme included them (see RPSM05102010). In addition, section 245 is modified by article 16 to exclude such contributions from schedule 24 to the Finance Act 2003 and so prevent a possible double deduction for the employer in respect of the same contributions.