Finance Act 2004 (c. 12)

Part 4 U.K. Pension schemes etc

Chapter 5 U.K. Registered pension schemes: tax charges

Valid from 06/04/2006

Unauthorised payments charge U.K.

210 Surchargeable unauthorised member payments U.K.

(1) This section identifies which unauthorised member payments made by a registered pension scheme in respect of an arrangement relating to a member under the pension scheme are surchargeable.

(2) If the surcharge threshold is reached before the end of the period of 12 months beginning with a reference date, each unauthorised member payment made in respect of the arrangement in the surcharge period is surchargeable.

(3) The surcharge period is the period—

(a) beginning with the reference date, and

(b) ending with the day on which the surcharge threshold is reached.

(4) The first reference date is the date on which the pension scheme first makes an unauthorised member payment in respect of the arrangement.

(5) Each subsequent reference date is the date, after the end of the previous reference period, on which the pension scheme next makes an unauthorised member payment in respect of the arrangement.

(6) The previous reference period is the period of 12 months beginning with the previous reference date or, if the surcharge threshold is reached in that period, is the surcharge period ending with the date on which it was reached.

(7) The surcharge threshold is reached if the unauthorised payments percentage reaches 25%.

(8) The unauthorised payments percentage is the aggregate of the percentages of the pension fund used up by each unauthorised member payment made by the pension scheme in respect of the arrangement on or after the reference date.

(9) The percentage of the pension fund used up on the occasion of an unauthorised member payment is—

where—

UMP is the amount of the unauthorised member payment, and

VR is an amount equal to the value of the member’s rights under the arrangement when the unauthorised payment is made (or, if the unauthorised payment is made after the member’s death, at the date of the member’s death).

(10) The value of the member’s rights under the arrangement on that date is the aggregate of—

(a) the value of the member’s crystallised rights under the arrangement on that date, calculated in accordance with section 211, and

(b) the value of the member’s uncrystallised rights under the arrangement on that date, calculated in accordance with section 212.