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

Relief for backdated pensions charged on the arising basis

Section 840 provides relief where a foreign pension, annuity, or increase in either is backdated to an earlier tax year, allowing the income to be treated as if it arose in that earlier year rather than the year it was actually received.

• This relief applies to foreign pensions, annuities, or increases in these that are treated as relevant foreign income and are taxed on the arising basis rather than the remittance basis
• Where such income is paid in respect of a tax year earlier than the year in which it actually arose, the taxpayer may claim to have it treated as income of that earlier year
• If a claim is made, the income is treated as arising from a source the person possessed in the earlier year, so that it is taxed in that earlier year rather than the later year of receipt
• The relief does not change the way the taxable amount is calculated — foreign pensions and annuities within these rules are still computed at 90% of their actual amount