What is the purpose of section 567A of the Income Tax (Earnings and Pensions) Act 2003?

Section 567A prevents double taxation where pension income arises from rights already taxed as employment income under the Part 7A disguised remuneration rules. It allows a deduction from taxable pension income equal to the amount previously charged under Chapter 2 of Part 7A, ensuring the same economic value is not taxed twice.

How does the carry forward of excess deduction work under section 567A?

If the amount previously taxed as employment income (amount EI) exceeds the current year's taxable pension income (amount TPI), the unused excess is not lost. It carries forward to subsequent tax years and is set against taxable pension income in those years until the full amount of the earlier employment income charge has been completely offset.

What happens if only part of the sum or asset was subject to the Part 7A charge?

Where pension rights derive from only part of the sum or asset subject to the Part 7A charge, the deduction is restricted on a just and reasonable basis. It is limited to the proportion of the earlier employment income charge corresponding to the part of the sum or asset from which the pension rights actually arose.

What conditions must be met for the section 567A deduction to apply?

Three conditions must be satisfied: there must be taxable pension income for the year (amount TPI); that pension income must arise from rights representing or deriving from a sum or asset that was the subject of a relevant step under Part 7A; and Chapter 2 of Part 7A must have actually applied to that step, meaning an employment income charge arose.

Income Tax (Earnings and Pensions) Act 2003 section 567A

Cases in which Part 7A has applied to source of pension income

Section 567A provides relief from double taxation where pension income arises from rights that have already been taxed as employment income under the disguised remuneration rules in Part 7A.

Where taxable pension income (amount TPI) flows from rights already charged to tax under the Part 7A disguised remuneration rules, a deduction is allowed from that pension income
The deduction equals the amount previously taxed as employment income under Chapter 2 of Part 7A (amount EI), preventing the same economic value from being taxed twice
If the amount previously taxed (amount EI) exceeds the current year's taxable pension income (amount TPI), the unused excess carries forward to be set against taxable pension income in future tax years until fully used
Where only part of the sum or asset behind the pension rights was subject to the Part 7A charge, the deduction is restricted to the corresponding proportion of the employment income previously taxed

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