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Income Tax (Earnings and Pensions) Act 2003

Section 583: Unauthorised payments

2337.This section applies to unauthorised payments made by approved retirement benefits schemes. It derives from sections 599A(9) and 600 of ICTA.

2338.Subsection (2) prevents the section applying if the payment has been taxed by section 623 as a return of surplus funds from an additional voluntary contributions scheme. It derives from section 599A(9) of ICTA.

2339.Subsection (3)(a) identifies the type of scheme to which the section applies. It derives from section 600(1) of ICTA. The scheme must be approved when the unauthorised payment is made. The section applies to schemes approved under Chapter 1 of Part 14 of ICTA or its predecessor Chapter 2 of Part 2 of FA 1970.

2340.The pension income Part does not repeat the reference to schemes approved under Chapter 2 of Part 9 of ICTA 1970. These are former approved superannuation schemes that lost their approval in 1980. It is not necessary for this Act to rewrite the reference to these schemes.

2341.Paragraph (c) of section 600(1) of ICTA refers to schemes approved under section 208 of ICTA 1970. These are also former approved superannuation schemes that lost their approval in 1980. But they may still enjoy the advantages that come from approval if they satisfy the conditions in section 608 of ICTA. Section 608 has been rewritten in Chapter 7 of this Part (Former approved superannuation schemes). The charge on unauthorised payments made by those schemes is dealt with in that Chapter rather than here.

2342.Subsection (3)(b) gives the condition that the payment is not authorised by the scheme rules or made as a consequence of paragraph 33 of Schedule 6 to FA 1989. Paragraph 33 of Schedule 6 to FA 1989 applies to the return of employee additional voluntary contributions. It deems the rules of an additional voluntary contributions scheme to include a requirement to repay surplus funds whether or not such a payment is authorised by the scheme rules. The charge on the return of these funds is dealt with in Chapter 13 of this Part (Return of surplus additional voluntary contributions).

2343.Subsection (4) prevents the section applying to a pension or annuity. This avoids any overlaps with section 580.

2344.Subsection (6) prevents a double charge if the unauthorised payment is either a repayment of the employee’s contributions or a commutation of the pension. If these payments exceed the benefits authorised by the scheme rules this Chapter will tax them as unauthorised payments. Subsection (6) is needed to prevent the payments being taxed again by sections 598 or 599 of ICTA. Those provisions impose specific charges on the repayment of the employee’s contributions or the commutation of the pension. The regulations referred to in subsection (6) apply to superannuation funds approved before 6 April 1980. These regulations are not yet obsolete.

2345.Subsection (7) clarifies the meaning of “payment”. It derives from section 600(4) of ICTA.

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