Finance Act, 1997

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Employers' pension contributions.

41.—(1) Chapter II of Part I of the Finance Act, 1972 , is hereby amended—

(a) in section 16, by the substitution of the following for subsection (4):

“(4) (a) Any sum paid by an employer by way of contribution under the scheme shall, for the purposes of Case I or II of Schedule D and of sections 15 and 33(2) of the Corporation Tax Act, 1976 , be allowed to be deducted as an expense, or expense of management, incurred in the chargeable period in which the sum is paid but no other sum shall for those purposes be allowed to be deducted as an expense, or expense of management, in respect of the making, or any provision for the making, of any contributions under the scheme.

(b) For the purposes of this section and of section 16A—

(i) a reference to a ‘chargeable period’ shall be construed as a reference to a ‘chargeable period or its basis period’ (within the meaning of paragraph 1 of the First Schedule to the Corporation Tax Act, 1976 ), and

(ii) in relation to an employer whose chargeable period is a year of assessment, ‘basis period’ means the period on the profits or gains of which income tax for that year of assessment falls to be finally computed for the purposes of Case I or II of Schedule D in respect of the trade, profession or vocation of the employer.

(4A) The amount of an employer's contributions which may be deducted under subsection (4) shall not exceed the amount contributed by that employer under the scheme in respect of employees in a trade or undertaking in respect of the profits of which the employer is assessable to income tax or corporation tax, as the case may be.

(4B) A sum not paid by way of an ordinary annual contribution shall for the purposes of subsection (4) be treated, as the Commissioners may direct, either as an expense incurred in the chargeable period in which the sum is paid, or as an expense to be spread over such period of years as the Commissioners think proper.”,

and

(b) by the insertion of the following section after section 16:

“Provisions supplemental to section 16(4).

16A.—(1) Where—

(a) there is, after the 21st day of April, 1997, an actual payment by an employer of a contribution under an exempt approved scheme,

(b) that payment would, apart from this section, be allowed to be deducted as an expense, or expense of management, of the employer in relation to any chargeable period, and

(c) the total of previously allowed deductions exceeds the relevant maximum,

the amount allowed to be so deducted in respect of the payment mentioned in paragraph (a) and of any other actual payments of contributions under the scheme which, having been made after the 21st day of April, 1997, fall within paragraph (b) in relation to the same chargeable period shall be reduced by whichever is the smaller of the excess and the amount which reduces the deduction to nil.

(2) In relation to any such actual payment by an employer of a contribution under an exempt approved scheme as would be allowed to be deducted as mentioned in subsection (1) in relation to any chargeable period—

(a) the reference in that subsection to the total of previously allowed deductions is a reference to the aggregate of every amount in respect of the making, or any provision for the making, of that or any other contributions under the scheme, which has been allowed to be deducted as an expense, or expense of management, of that person in relation to all previous chargeable periods, and

(b) the reference to the relevant maximum is a reference to the amount which would have been that aggregate if the restriction on deductions for sums other than actual payments imposed by virtue of subsection (4) of section 16 had been applied in relation to every previous chargeable period,

and, for the purposes of this subsection, an amount the deduction of the whole or any part of which falls to be taken into account as allowed in relation to more than one chargeable period shall be treated as if the amount allowed were a different amount in the case of each of those periods.

(3) For the purposes of this section, any payment which is treated under subsection (4B) of section 16 as spread over a period of years shall be treated as actually paid at the time when it is treated as paid in accordance with that subsection.”.

(2) The Corporation Tax Act, 1976 , is hereby amended, in Part 1 of the Second Schedule, by the deletion of paragraph 31.

(3) This section shall have effect in the case of any employer for a chargeable period (within the meaning of section 16 (as amended by this Act) of the Finance Act, 1972 ) being—

(a) where the chargeable period is an accounting period of a company, an accounting period ending with a day after the 21st day of April, 1997, and

(b) where the chargeable period is a year of assessment, any year of assessment the employer's basis period for which ends with a day after that date.