Article 25CB Circumstance B: tax treatment of stand-alone lump sumsF1F2

Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect with the following modifications F3in relation to a member of a pension scheme F4to whom a stand-alone lump sum is paid in circumstances where article 25B(3) (circumstance B) applies.

That Chapter has effect as if, after section 637G (trivial commutation lump sums and winding-up lump sums) there were inserted—

“Stand-alone lump sums

637GA

(1)

Subject to subsection (2), no liability to income tax arises on a stand-alone lump sum paid under a registered pension scheme.

(2)

If the amount of the stand-alone lump sum exceeds the permitted maximum, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

(3)

In subsection (2) “the permitted maximum”, in relation to a stand-alone lump sum, means—

(a)

the amount of a stand-alone lump sum that could have been paid to the individual with no liability to income tax on 5 April 2023 under the arrangement pursuant to which the entitlement to the stand-alone lump sum arises in respect of the individual, less

(b)

the aggregate of the amounts of any stand-alone lump sums and pension commencement lump sums previously paid to the individual under that arrangement after that date.”

Section 637Q of ITEPA 2003 (availability of individual’s lump sum allowance) has effect as if, in the definition of “relevant lump sum” in subsection (2)(b) of that section, there were included a reference to a stand-alone lump sum.

Section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) has effect as if, in the definition of “relevant lump sum” in subsection (2)(b) of that section, there were included a reference to a stand-alone lump sum.

Section 637U of ITEPA 2003 (availability of individual’s allowances where lump sums or lump sum death benefits already paid by non-UK schemes) has effect as if references in that section to a pension commencement lump sum included a stand-alone lump sum.