RPSM13102355 - Technical Pages: International: Application of charges to non-UK schemes: Annual allowance: Pension input amounts for cash balance arrangements and defined benefits arrangements: The appropriate fraction

The appropriate fraction of what would otherwise be the pension input amount

The appropriate fraction is:

EI

Note: The definition of EI was amended by paragraph 19 of Schedule 29 to the Finance Act 2008.

2006/07 and 2007/08

The original definition of EI which applied for these two years was the total amount of employment income of the individual from any relevant employment or relevant employments for the tax year. A relevant employment is an employment(s) with an employer(s) who is a sponsoring employer(s) of the currently-relieved non-UK pension scheme. EI includes earnings from a relevant overseas employment even where they are not chargeable to UK tax in that year.

2008/09 onwards

The definition of EI was amended by FA 2008 to exclude any employment income which is “exempt income” within the meaning of section 8 ITEPA 2003. For example, section 307 ITEPA 2003 provides that there is no liability to income tax under the benefits code for provision by an employee’s employer for a retirement or death benefit. Likewise, some double taxation agreements provide that the individual is exempt from any liability to income tax on contributions to pension schemes. This provision should not be included in the calculation of Employment Income for the purposes of this formula.

TE

TE is so much of EI as constitutes taxable earnings from any such employment coming within the meaning of section 10(2) ITEPA 2003. Section 10(2) provides for taxable earnings from an employment in a tax year to be determined in accordance with the rules in Chapters 4 and 5 of ITEPA 2003. It excludes income that is not remitted to the UK if it is not chargeable to UK tax.

RPSM13102360 gives examples of the operation of the formula for 2006/07 and 2008/09.