Pensions Increases (Taxation) (Hansard, 21 December 1962)

§ Mr. Maudling

In general these pensions increases and supplements will be liable to United Kingdom tax, except in the ease of a pensioner who is a resident, not of the United Kingdom, but of a country with which the United Kingdom has a double taxation agreement providing for the exemption from United Kingdom tax of such pensions.

There are, however, some non-resident civilian pensioners who will receive increases which in principle ought to be subject to United Kingdom tax but would escape liability on a technicality if the law is not amended. Section 40 (1), Finance Act, 1956, exempts from United Kingdom tax pensions paid under the authority of the Pensions (India, Pakistan and Burma) Act, 1955 to non-residents of the United Kingdom, but excludes from this special exemption any part of the pension arising from the application of Pensions (Increase) Acts up to and including that of 1956. I propose to introduce legislation in next year's Finance Bill which will similarly exclude from exemption's from the Income Tax year 1963–64 any increases in these pensions arising from Pensions (Increase) Acts after the Act of 1956.

Consideration of this matter has shown that increases payable under the Pensions (Increase) Act, 1959, on civilian pensions paid under the authority of the Pensions (India, Pakistan and Burma) Act, 1955, have been treated as liable to Income Tax in the hands of certain pensioners who are not resident in the United Kingdom although there is no statutory authority for this treatment. As I have already stated, I propose that next year's Finance Bill shall bring those pensions increases within the scope of the United Kingdom tax charge as from the year 1963–64 but the Inland Revenue will repay tax which has been collected without statutory authority on pensions increases payable under the Pensions (Increase) Act, 1959, in the cases concerned for years up to and including the year 1962–63.