Finance Act, 1972

Certain approved schemes: exemptions and reliefs.

16.—(1) This section has effect as respects—

(a) any approved scheme which is shown to the satisfaction of the Commissioners to be established under irrevocable trusts, or

(b) any other approved scheme as respects which the Commissioners, having regard to any special circumstances, direct that this section shall apply,

and any scheme which is for the time being within paragraph (a) or (b) is in this Chapter referred to as an “exempt approved scheme”.

(2) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of income derived from investments or deposits of a scheme if, or to such extent as the Commissioners are satisfied that, it is income from investments or deposits held for the purposes of the scheme.

(3) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of underwriting commissions if, or to such extent as the Commissioners are satisfied that, the underwriting commissions are applied for the purposes of the scheme, and in respect of which the trustees of the scheme would, but for this subsection, be chargeable to tax under Case IV of Schedule D.

(4) 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 the provisions of section 214 of the Income Tax Act, 1967 , relating to expenses of management, be allowed to be deducted as an expense or expense of management incurred in the year in which the sum is paid:

Provided that—

(a) the amount of an employer's contributions which may be so deducted shall not exceed the amount contributed by him 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,

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

(5) (a) Any ordinary annual contribution paid under the scheme by an employee shall, in assessing tax under Schedule E, be allowed to be deducted as an expense incurred in the year in which the contribution is paid.

(b) Any contribution, which is not an ordinary annual contribution, paid or borne by an employee under the scheme may, as the Commissioners think proper—

(i) be treated, as respects the year in which it is paid, as an ordinary annual contribution paid in that year, or

(ii) be apportioned among such years as the Commissioners direct and the amount of the contribution attributed thereby to any year shall be treated as an ordinary annual contribution paid in that year.

(c) The aggregate amount of any contributions (whether ordinary annual contributions or contributions treated as ordinary annual contributions) allowed to be deducted in any year shall not exceed 15 per cent. of the remuneration for that year of the office or employment in respect of which the contributions are paid.

(6) Relief shall not be given under section 143 or 151 of the Income Tax Act, 1967 , in respect of any payment in respect of which an allowance can be made under subsection (5).

(7) This section has effect only as respects income arising or contributions paid at a time when the scheme is an exempt approved scheme.