Income Tax (Earnings and Pensions) Act 2003 section 640

Exemption under section 639 where income withheld

Section 640 extends the tax exemption provided by section 639 (which covers pensions paid in respect of death due to military or war service) to situations where that exempt pension is reduced because the individual also receives another pension or allowance.

• Where a person is entitled to both a military/war service death pension ("Pension A") and another pension or allowance ("Pension B"), this section may apply.
• The section is triggered when all or part of the exempt Pension A is withheld because of the individual's entitlement to Pension B.
• The portion of Pension B equal to the withheld amount of Pension A is treated as if it were part of Pension A for tax exemption purposes.
• This ensures the individual does not lose the benefit of the section 639 exemption simply because one pension is offset against the other.