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Income Tax (Pensions) Bill 2007 Practitioners Seminar

Income Tax (Pensions) Bill 2007 Practitioners Seminar. Date 5 & 7 November 2007. Income Tax (Pensions) Bill 2007. Domestics Evacuation in case of fire, etc. Introductions Paul Martin : Deputy Assessor Richard Carter : Senior Pensions Officer. Income Tax (Pensions) Bill 2007.

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Income Tax (Pensions) Bill 2007 Practitioners Seminar

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  1. Income Tax (Pensions) Bill 2007 Practitioners Seminar Date 5 & 7 November 2007

  2. Income Tax (Pensions) Bill 2007 • Domestics • Evacuation in case of fire, etc. • Introductions • Paul Martin : Deputy Assessor • Richard Carter : Senior Pensions Officer

  3. Income Tax (Pensions) Bill 2007 • Current Position • Income Tax (Retirement Benefit Schemes) Act 1978 • Income Tax Act 1989 • Section 50B Income Tax Act 1970

  4. Income Tax (Pensions) Bill 2007 • Sole Purpose: • Income Tax (Retirement Benefit Schemes) Act 1978 • Section 1(2)(a) : that the scheme is bona fide established for the sole purpose of providing the relevant benefits in respect of service as an employee, being benefits payable to, or to the widow, children or dependants or personal representatives of, the employee • Income Tax Act 1989 • Section 1 : 'personal pension scheme' means a scheme whose sole purpose is the provision of annuities or lump sums under arrangements made by individuals in accordance with the scheme • Income Tax Act 1970 • Section 50B(3)(b) : has for its sole or main purpose the provision of superannuation benefits in respect of persons' employment in the trade or undertaking wholly outside the Island

  5. Income Tax (Pensions) Bill 2007 • E E T : • Exempt : Contributions into approved schemes • Exempt : Investments throughout approval period • Tax : On relevant benefits • E : • Tax free lump sums payable: • Death in Service • Commutation of pension on or before retirement

  6. Income Tax (Pensions) Bill 2007 • Withdrawals • Clause 1 confirms existing position ITIP on pension • Clause 2 : • Removes compulsion to purchase an annuity • Introduces Withdrawal of Funds (Regulations) • Deals with balancing payments following death • Confirms ITIP on pensions in retirement

  7. Income Tax (Pensions) Bill 2007 • Investment Rules • Clauses 3 & 4 : • Introduce power to regulate extending / restricting meaning of investments • Publish Guidance Material

  8. Income Tax (Pensions) Bill 2007 • Trivial Commutation • Clauses 5 & 6 : • Concession introduced June 2007 • Statutory backing for both occupational and personal schemes • 30% tax free cash • 10% tax to be set by Order of Tynwald • Regulations

  9. Income Tax (Pensions) Bill 2007 • Lump Sum Limit • Clause 7 will allow occupational schemes to pay up to 30% lump sum • Clause 8 increases lump sum limit to 30% for personal pension schemes • Clause 9 removes the permitted maximum, previously limiting lump sum to £150,000

  10. Income Tax (Pensions) Bill 2007 • Flexible Retirement Options : • Clauses 10 and 11 will allow members to extract lump sum early i.e. before other pension benefits commence • Lump sum max. 30% • Payable on or after earliest date pension can be paid • Can only be paid once • Clearance not required • BUT the Assessor must be informed within 3 month of payment • Clause 12 confirms ‘retirement’ does not have to occur before payment of relevant benefits commence

  11. Income Tax (Pensions) Bill 2007 • Annual Allowance • Clauses 13 and 14 replace percentage based contributions with new £300,000 Annual Allowance • Contributions from all sources into all schemes limited to £300,000 per member • Tax relief limited to: • Lower of £300,000 & 100% of relevant earnings • Subject to new Minimum Allowance • Minimum Allowance = £3,600 (paid by member)

  12. Income Tax (Pensions) Bill 2007 • Annual Allowance • New Charge on Excess Contributions • Aggregate of all contributions > annual allowance • Charge to be remitted to Assessor within 14 days of end of tax month in which excess was identified • ‘Identified’ includes notification by the Assessor • Charge = 40% • Charge can be avoided if amount of excess repaid in full (By Concession)

  13. Income Tax (Pensions) Bill 2007 • Miscellaneous Amendments • Approved Insurer • Section 11B IT (RBS) A 1978: 20% to be replaced by Order (18%) • Remaining schedule 5 ITA 1989 provisions repealed • Reporting to the Assessor

  14. Income Tax (Pensions) Bill 2007 • International Personal Pensions • Awaiting final draft of new provision • Based on existing 50B ITA 1970 statute • Available to persons not resident in IOM • Established under irrevocable trust governed by IOM laws • Sole or main purpose • Administered by person resident in IOM • No tax on pension, unless member becomes resident in IOM

  15. Income Tax (Pensions) Bill 2007 • Further Information: • The Income Tax Division’s website www.gov.im/incometax Richard Carter ATT Tel: 685270 Richard.Carter@itd.gov.im

  16. Income Tax (Pensions) Bill 2007 Questions

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