Section 637C — Income Tax (Earnings and Pensions) Act 2003: Serious ill-health lump sums

Serious ill-health lump sums 637C 1 Subject to subsections (2) and (4), no liability to income tax arises on a serious ill-health lump sum paid under a registered pension scheme.

2 If—

a a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is under 75, and b the 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 serious ill-health lump sum paid to a member, means so much of the member’s lump sum and death benefit allowance as is available on the member becoming entitled to the lump sum (see section 637S).

4 If a serious ill-health lump sum is paid under a registered pension scheme to a member who (at the time of the payment) is 75 or over, section 579A (pensions) applies to the lump sum as it applies to any pension under a registered pension scheme.