What does section 633 of the Income Tax (Earnings and Pensions) Act 2003 do?

Section 633 creates an income tax charge on voluntary annual payments made to former employees, former office-holders, or their family members by or on behalf of the former employer or their successors. It does not apply to voluntary pensions, which are dealt with separately elsewhere in the Act.

Who can receive a payment that falls within section 633 ITEPA 2003?

The payment must be made to a former employee or former office-holder, or to specified family members including the surviving spouse or civil partner, or any child, relative, or dependant of the former employee or office-holder. This requirement is referred to as Condition A in the legislation.

Does section 633 apply when the payer is based outside the United Kingdom?

When the payer is based outside the United Kingdom, section 633 only applies if the recipient is resident in the United Kingdom. If both the payer and the recipient are outside the United Kingdom, the income tax charge under this section does not apply to the voluntary annual payment.

What is the meaning of 'office' for the purposes of section 633 ITEPA 2003?

An 'office' means any position that exists independently of the person who holds it and can be filled by successive holders. Common examples include company directorships or trusteeships. This broad definition ensures the section covers payments connected with a wide range of official positions.

Income Tax (Earnings and Pensions) Act 2003 section 633

Voluntary annual payments

Section 633 sets out when a voluntary annual payment (or one that can be discontinued) made to a former employee, office-holder, or their family is subject to income tax.

The payment must be voluntary or capable of being stopped, and must be made to a former employee or office-holder, their surviving spouse or civil partner, or their child, relative, or dependant.
The payment must be made by or on behalf of the former employer (or the person under whom the office was held), or that person's successors.
Where the payer is outside the United Kingdom, the charge only applies if the recipient is resident in the United Kingdom.
An "office" means any position that exists independently of the person who holds it and can be filled by successive holders.

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