Income Tax (Earnings and Pensions) Act 2003 section 554T

Exclusions: employee pension contributions

Section 554T provides an exclusion from the disguised remuneration rules in Part 7A where sums or assets held by a third party arise from pension contributions made by the employee out of their own funds.

• Where an employee has made an "excluded pension contribution" to a third-party arrangement on or after 6 April 2011, any earmarking, payment or making available of sums or assets that arise from that contribution is excluded from Part 7A charges
• If the sums or assets only partly derive from the excluded pension contribution, they must be split on a just and reasonable basis into an excluded portion and a taxable portion
• For payments or benefits (as opposed to earmarking), the exclusion only applies where the sums or assets represent "relevant benefits" — broadly, retirement or death benefits that would be taxable under other pension provisions
• An "excluded pension contribution" must be a cash payment by the employee that gives rights solely to relevant benefits, must not qualify for tax relief as a registered pension contribution, and must have no connection to any loan or prior disguised remuneration step