Explanatory note

Section 196A of the Finance Act 2004 provided that Regulations could be made restricting the extent to which contributions paid by an employer under a registered pension scheme in respect of an individual are subject to tax relief in two circumstances. The first is where payment of benefits to or in respect of that individual under the scheme are payable only if benefits are not so paid under an employer-financed retirement benefits scheme. The second is where, because benefits are or may be payable to or in respect of that individual under an employer-financed retirement benefits scheme, the value of a transfer out of a registered pension scheme will or may be reduced. These Regulations restrict employers' tax relief in those two circumstances.

Regulation 1 provides for citation, commencement and interpretation. Regulation 2 provides that the Regulations apply in the circumstances described in section 196A(2) and/or (3) of the Finance Act 2004, subject to the exception described in Regulation 2(2).

Regulations 3 to 10 provide for the amount of the restriction. The method is based on the calculation of a member’s pension input amount for a scheme (for the purposes of the Annual Allowance Charge) set out in sections 230 to 237 of the Finance Act 2004, with the modifications set out in the Regulations. The aggregate pension input amount is excluded from tax relief.

A regulatory impact assessment in respect of the provisions of Part 4 of the Finance Act 2004 and subordinate legislation under it was published by the Board of Inland Revenue on 8 April 2004, and is available on the Inland Revenue website at www.inlandrevenue.gov.uk/ria/simplifying-pensions.pdf or obtained by writing to HM Revenue and Customs , Capital & Savings Ministerial Correspondence Unit, 1st Floor, Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG2 1BB.