I move Financial Resolution No. 12:
(1) THAT, as respects any repayment of contributions referred to in section 21 of the Finance Act, 1972 (No. 19 of 1972), which is made on or after the 29th day of January, 1992, the said section 21 shall apply and have effect as if, in subsection (2), "25 per cent." were substituted for "10 per cent.".
(2) THAT subsection (2) of section 22 of the Finance Act, 1972, shall not be affected by the provisions of paragraph (1) of this Resolution.
(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
This resolution provides for an increase, from 10 per cent to 25 per cent, in the rate of tax charged on refunds of pension contributions.
Where an individual makes contributions to a pension scheme, he gets tax relief for them at normal tax rates. Section 21 of the Finance Act, 1972, provides that, where contributions are later refunded, the refund is taxed at 10 per cent. The charge is imposed to recover, in some measure, the tax relief previously given in respect of those contributions.
Refunds of contributions are running at some £20 million a year and this Resolution will update the tax charge to the more realistic level of 25 per cent in respect of refunds made on or after today.
I would emphasise that there is no change in the tax relief available on the making of contributions to pension funds; it is only the tax charge on refunds that is being increased.
I commend this resolution to the House.