Legislation – Finance Act 2024

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Part 1Income tax and corporation tax

Chapter 2Pensions

15MPs’ pension scheme etc: rectification of discrimination

(1)

The Treasury may by regulations make provision about the treatment for the purposes of income tax or capital gains tax of—

(a)

rectification payments, or tax redress payments, made to or in respect of a member of a relevant pension scheme,

(b)

tax windfalls resulting from a rectification exercise, or

(c)

increases or decreases resulting from a rectification exercise in—

(i)

the rate of a scheme pension payable by a relevant pension scheme, or

(ii)

the value of any rights under a relevant pension scheme in respect of a member.

(2)

“Relevant pension scheme” means—

(a)

an MPs’ pension scheme,

(b)

a Senedd pension scheme, or

(c)

an Assembly pension scheme.

(3)

“Rectification payment” means—

(a)

a payment of pension benefits that—

(i)

are payable as a result of a rectification exercise, and

(ii)

would have become payable at an earlier time if the rectification exercise had been retrospective, or

(b)

a refund of pension contributions that is owed as a result of a rectification exercise.

(4)

“Tax redress payment” means a payment made to or in respect of a member of a relevant pension scheme where—

(a)

the member was subject to a rectification exercise, and

(b)

the payment represents compensation for an amount paid in respect of an income tax liability for any tax year that would not have arisen if the rectification exercise had been retrospective.

(5)

“Tax windfall”, in relation to a rectification exercise and a member of a relevant pension scheme, means—

(a)

a liability of the member for the annual allowance charge that would have arisen in the tax year 2023-24 or any earlier tax year, or

(b)

a liability of the member for the lifetime allowance charge that would have arisen in the tax year 2022-23 or any earlier tax year,

if the rectification exercise had been retrospective.

(6)

“Rectification exercise” means an exercise, conducted by a relevant pension scheme in accordance with the rules of the scheme, under which the benefits payable to or in respect of a member in respect of the member’s remediable service (or any part of the member’s remediable service)—

(a)

cease to be career average benefits and become instead final salary benefits, or

(b)

cease to be final salary benefits and become instead career average benefits.

(7)

Regulations under this section may—

(a)

modify any enactment contained in the Income Tax Acts or relating to capital gains tax;

(b)

impose a charge to income tax in relation to a tax windfall;

(c)

make different provision for different cases;

(d)

include consequential, incidental, supplemental, transitional, transitory or saving provision.

(8)

Regulations under this section—

(a)

if made before 6 April 2025, may be made so as to have effect in relation to the tax year 2024-25;

(b)

if made on or after 6 April 2025, may include provision that has effect in relation to times before the regulations are made if that provision does not increase any person’s liability to tax.

(9)

In this section—

“an Assembly pension scheme” means a pension scheme made under section 48 of the Northern Ireland Act 1998;

“lifetime allowance charge” means the charge to income tax under section 214 of FA 2004, as it had effect before its repeal by this Act;

“modify” includes disapply or supplement;

“an MPs’ pension scheme” means a pension scheme made under paragraph 12(1) of Schedule 6 to the Constitutional Reform and Governance Act 2010;

“remediable service” means service that is pensionable service under a relevant pension scheme and—

(a)

in the case of service that is pensionable service under an MPs’ pension scheme, takes place in the period beginning with 8 May 2015 and ending with 31 March 2023;

(b)

in the case of service that is pensionable service under a Senedd pension scheme or an Assembly pension scheme, takes place in the period beginning with 6 May 2016 and ending with 6 May 2021;

“scheme pension” has the same meaning as in Part 4 of FA 2004 (pensions etc);

“a Senedd pension scheme” means a pension scheme made under section 20 of the Government of Wales Act 2006.