Income Tax (Earnings and Pensions) Act 2003 section 386

Charge on payments to non-approved retirement benefits schemes

Section 386 sets out when an income tax charge arises on an employee because their employer has made payments into a non-approved pension (retirement benefits) scheme.

• Where an employer pays money into a non-approved retirement benefits scheme for an employee, the employee is subject to an income tax charge on those payments.
• The section clarifies that this charge takes priority over certain other tax provisions, resolving any overlap with rules on payments and benefits on termination of employment.
• The definitions of "employee" and "director" used in this section follow those used more broadly in the pension legislation, and the rules about schemes intended to benefit persons other than the employee also apply across the whole chapter, ensuring that available reliefs are not inadvertently restricted.
• Reliefs from this charge are available under section 392 and under section 266A of the Income and Corporation Taxes Act 1988, which may reduce or eliminate the tax liability in certain circumstances.