Clause 23 - Modification of certain existing transitional protections

Finance (No. 2) Bill – in the House of Commons at 3:30 pm on 20 June 2023.

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Amendment made: 14, page 15, line 2, leave out from “(S.I. 2006/572),” to end of line 12 and insert

“in article 25C (payment of stand-alone lump sums: tax consequences), for paragraph (3) substitute—

‘(3A) Section 636A of ITEPA 2003 (exemptions and liabilities for certain lump sums under registered pension schemes) is to be read as if, after subsection (1C), there were inserted—

‘(1D) In the case of a stand-alone lump sum paid under a registered pension scheme—

(a) no liability to income tax arises on so much of the sum as does not exceed the 5 April 2023 maximum, and

(b) section 579A applies in relation to the remainder (if any) of the sum as that section applies to any pension under a registered pension scheme.

(1E) In subsection (1D) and this subsection—

(a) ‘stand-alone lump sum’ has the meaning given by paragraph (3) of article 25 of the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572);

(b) ‘the 5 April 2023 maximum’ means the maximum amount that, on 5 April 2023, could have been paid to the member under the registered pension scheme by way of a stand-alone lump sum.

(1F) For the purposes of determining the maximum amount mentioned in paragraph (b) of subsection (1E), condition C in article 25A of the order mentioned in paragraph (a) of that subsection (condition that member has reached normal minimum pension age etc) is treated as met.’”—(Victoria Atkins.)

This amendment provides that any amount of a stand-alone lump sum in excess of the maximum amount that could have been paid to the relevant pension scheme member free of tax on 5 April 2023 is subject to income tax at the member’s marginal rate.