RPSM13102372 - Technical Pages: International: Application of charges to non-UK schemes: Annual allowance: Pension input amounts for other money purchase arrangements: The appropriate fraction of employer contributions

The appropriate fraction is:

EI

The definition of EI was amended with effect from 12 March 2008 by paragraph 19 of Schedule 29 to the Finance Act 2008. The original definition applied in 2006/07, and the amended definition applies in 2008/09 and subsequent tax years. Transitional provisions apply in the 2007/08 tax year.

2006/07

The original definition of EI which applied for the 2006/07 tax year was the total amount of employment income of the individual from any employment or employments with the employer for the tax year. EI includes earnings from any such employment(s) even where they are not chargeable to UK tax in that year.

2008/09 onwards

For the 2008/09 tax year and subsequent years the definition of EI was amended by the exclusion of any “exempt income” within the meaning of section 8 ITEPA 2003. Various types of income of the individual are excluded. Amongst the exclusions are any contributions made to, and any provision made in respect of, a pension scheme on which the individual is exempted from any liability to income tax, for example where such an exemption applies by virtue of a double taxation agreement.

2007/08

For the 2007/08 tax year the definition of EI to be used is dependent on when an employer makes contributions to the scheme in respect of the individual. The appropriate fraction for 2007/08 is the aggregate of:

• the appropriate fraction of so much of the employer contributions as were paid before 12 March 2008 calculated using the original definition of EI, and
• the appropriate fraction of so much of the employer contributions as were paid on or after 12 March 2008 calculated using the amended definition of EI.

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 (see RPSM13102355).

RPSM13102374 provides examples of how the appropriate fraction is calculated in the 2006/07 tax year and in the 2008/09 tax year. RPSM13102376 provides examples of how the appropriate fraction is calculated in the 2007/08 tax year.