Income Tax (Trading and Other Income) Act 2005 section 840

Relief for backdated pensions charged on arising basis

Section 840 and paragraph 152 of Schedule 2 ensure that relief for backdated foreign pensions taxed on the arising basis can be claimed even where the earlier tax years involved fall before the 2005-06 tax year.

• Where a foreign pension is received as a lump sum covering earlier years, the taxpayer may claim relief so that the tax charge reflects what would have been due had the pension been received in those earlier years.
• The fact that the earlier year falls before 2005-06 does not prevent a valid claim being made under section 840.
• Any necessary adjustments — including repayments of tax, amended assessments, or other corrections — can be made in respect of tax years before 2005-06 to give effect to the relief.
• This transitional rule ensures continuity of treatment across the boundary between the old and new income tax legislation.