SE15426 - Non-approved retirement benefits schemes: example: overseas schemes: ESC A10: partial exemption

Extra Statutory Concession A10

An employee retires on 31 December 1999 from employment with a foreign company after 15 years' service.

The emoluments of the first 6 years were not within Case I of Schedule E and so count as “foreign service” (see the definition at SE13690) whereas the last 9 were.

Both employee and employer contributed to the “overseas” company pension scheme, in the proportion 50%/50%. The employer contributions for the last 9 years of service have been assessed under Section 595(1) ICTA 1988 on the employee (see SE15040)

On retirement, the scheme pays a lump sum of £90,000. £45,000 of this relates to contributions by the employer, and in turn £27,000 is attributable to employer contributions assessed under Section 595(1) ICTA 1988.

The employee is chargeable for 99/2000 under Section 596A ICTA on £18,000 (£90,000 lump sum received less £45,000 attributable to employee’s own contributions – see SE15090 - and £27,000 attributable to employer contributions which have been assessed – see SE15040).

But ESCA10 applies. The “foreign service” does not meet any of the three tests in SE15063 but partial exemption is available. Following SE15063, the charge is reduced by the same proportion as the foreign service bears to the employee's total service in that employment. So the reduction is £7,200 (£18,000 x 6/15 = £7,200), leaving £10,800 (£18,000 - £7,200) chargeable for 99/2000 Section 596A ICTA 1988.