This section identifies which unauthorised member payments made by a registered pension scheme F1to or in respect of a person who is or has been a member of the pension scheme are surchargeable.

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 F2to or in respect of the person in the surcharge period is surchargeable.

The first reference date is the date on which the pension scheme first makes an unauthorised member payment F3to or in respect of the person.

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 F4to or in respect of the person.

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.

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

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 F5to or in respect of the person on or after the reference date.

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

$\frac{\mathrm{UMP}}{\mathrm{VR}}\times \mathrm{100}$

where—

UMP is the amount of the unauthorised member payment, and

VR is an amount equal to the F6aggregate of the value of the member's rights under arrangements relating to the member under the pension scheme when the unauthorised payment is made (or, if the unauthorised member payment is made after the member has died or has otherwise ceased to be a member of the pension scheme, at the date when the member died or otherwise ceased to be a member).