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

Exclusions: transfers between certain foreign pension schemes

Section 554X provides an exclusion from the disguised remuneration rules in Chapter 2 when pension rights are transferred between certain foreign pension schemes, specifically those that previously benefited from tax relief under the now-repealed section 390 of ITEPA 2003.

• When pension rights under a "section 390 scheme" (a historic foreign pension scheme for non-domiciled employees with foreign employers) are transferred to another section 390 scheme or overseas pension scheme, the transfer itself is not caught by the disguised remuneration charge in Chapter 2
• The exclusion also covers transfers between overseas pension schemes where some or all of the transferred rights originally derive from a section 390 scheme, but if only some of the rights qualify, the transfer must be split on a just and reasonable basis so that only the section 390 portion benefits from the exclusion
• The exclusion does not extend to rights arising from employer contributions made on or after 6 April 2006 that did not receive tax relief or constitute tax-exempt provision — these must be separated out through a further just and reasonable apportionment
• Where the employer is a company within a group, contributions made by any group company are treated as contributions made by the employer for the purpose of determining which rights fall outside the exclusion