SE15060 - Non-approved retirement benefits schemes: overseas schemes: anti-avoidance rules

Section 596A(9) ICTA 1988

An “overseas” scheme will be one where the income and gains of the scheme investments are outside the charge to UK tax.

The treatment of a lump sum from a non-approved overseas “retirement benefits scheme” depends on whether the scheme was entered into or varied (see below) on or after 1 December 1993:

• Treat a scheme as “varied” if any of its terms change. For example, if a scheme rule that provides for annual contributions of £1,000 to be made is changed to increase the annual contributions to £2,000, that is a variation. By contrast, if contributions are increased by reference to a formula in the scheme that is related to a variable such as earnings, profits or turnover then that is not a variation: the same rule is being applied.

If the scheme was entered into before 1 December 1993, follow item 3 of SE15100

Otherwise, the charge under s596A ICTA 1988 is calculated by deducting only the following from the lump sum:

• any sum contributed by the employer on which the employee was chargeable and has been assessed under Section 595(1) ICTA 1988 (see SE15040) and
• any sum paid by the employee

There are further rules where the lump sum comes from either the disposal of a part of an asset or the surrender of any part of or share in any rights in any asset and further lump sums may arise from further such disposals or surrenders. See SE15061.

Note: this provision is an anti-avoidance measure. The calculation applies if any of the scheme’s income or gains are not brought into charge to UK tax. So it applies even if some of its income or gains is charged to UK tax.

Note: in all the above cases, the charge may be eliminated by Extra Statutory Concession A10 (see SE15062)