RPSM04104910 - Technical Pages: Taxation: Unauthorised Payments: Recycling of pension commencement lump sums: Overview of Recycling

Recycling

Recycling of a pension commencement lump sum means using that lump sum as the means to increase contributions significantly to a registered pension scheme. The recycling rule is intended to prevent the systematic exploitation of the tax rules for registered pension schemes that involve generating artificially high amounts of tax relief by putting the pension commencement lump sum back into a registered pension scheme by way of a further, tax relieved, contribution.

RPSM04104920 explains when the recycling rule applies.

When the recycling rule applies the all or part of the pension commencement lump sum is treated as an unauthorised member payment for tax purposes.

If, having obtained the facts, a HMRC officer considers that the recycling rule does or might apply to a particular individual, that officer must make a report to the Technical Team, Audit & Pension Schemes Services, Yorke House, Castle Meadow Road, Nottingham NG2 1BG before taking the matter further with the individual.