RPSM04104830 - Technical Pages: Taxation: Unauthorised payments: Scheme sanction charge: Scheme chargeable payment

Scheme chargeable payments

Scheme chargeable payments are

• any unauthorised payment by the pension scheme other than a payment that is exempted by s241(2) from being a scheme chargeable payment (see below) and
• a payment that the pension scheme is treated as having made and classed as a scheme chargeable payment by section 183 or 185 because of unauthorised borrowing.
• a payment that the scheme is treated as having made and classed as a scheme chargeable payment by section 185A (income from taxable property) or section 185F (gains from taxable property)
• a payment that the scheme is treated as having made and classed as a scheme chargeable payment by section 181A due to the failure to make the minimum level of payment either to a member from an alternatively secured pension fund or to a dependant from a dependant’s alternatively secured pension fund.

Unauthorised payments that are not scheme chargeable payments

• The payment is treated as having been made by s173 and the asset used to provide the benefit is not a wasting asset as defined in section 44 TCGA 1992. Section 173 FA 2004 treats the use of a scheme asset to provide a benefit to a member or a member of their family or household as an unauthorised payment.
• The payment is a compensation payment as defined by s178. (The payment is made to a sponsoring employer in respect of a liability to that employer that arises from a criminal, fraudulent or negligent act or omission by the member.)
• The payment is made to comply with a court order or an order by a person or body with the power to order the making of the payment.
• The payment is made on the grounds that a court or any such person or body is likely to order (or would be were it asked to do so) the making of the payment.
• The payment is of a description prescribed by regulations made by HMRC. For more information about unauthorised payments that have been prescribed by regulations as not being scheme chargeable payments, see RPSM04104835.

Where an unauthorised payment has been made but has been reduced because an amount is withheld in anticipation of a scheme sanction charge (see RPSM04104030) and the scheme sanction charge turns out to be less than the amount withheld then any subsequent payment of the balance to the recipient of the unauthorised payment within 2 years of the date of the unauthorised payment is not treated as an unauthorised payment nor a scheme chargeable payment.

Any unauthorised lump sum payment that is not a pension commencement lump sum solely because it is more than the permitted maximum (as defined by paragraph 2 schedule 29) and the payment would not have been unauthorised if

• in the case of a member with enhanced protection paragraphs 27 and 29 schedule 36 had not applied, or
• in the case of a member without enhanced protection paragraph 28 schedule 36 had not applied.