Income Tax (Trading and Other Income) Act 2005 section 866

Employee benefit contributions: non-trades and non-property businesses

Section 866 restricts deductions for employee benefit contributions made outside of trades and property businesses, with transitional rules governing its commencement and the pension scheme definitions that applied before the new pensions tax regime took effect on 6th April 2006.

• Section 866 does not apply to deductions for periods ending before 27th November 2002, nor to employee benefit contributions made before that date
• Before 6th April 2006, the exclusions in section 866 referred to retirement benefits schemes under ICTA section 611 and personal pension schemes approved under ICTA section 630, rather than the registered pension scheme definitions used from that date onwards
• The Treasury had the power under Finance Act 2004 to bring the updated pension scheme definitions into effect by order, replacing the pre-April 2006 wording with the current version of section 866(5)
• These transitional provisions ensured a smooth changeover from the old pension tax legislation to the simplified regime introduced by the Finance Act 2004

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