RPSM04104995 - Technical Pages: Taxation: Unauthorised Payments: Recycling of pension commencement lump sums: Internetional Aspects

Non-UK resident individuals and members of overseas pension schemes

Recycling and non-UK resident individuals

Recycling devices involving pension commencement lump sums paid to non-UK resident individuals will be treated no differently from those devices involving UK residents. The fact that an individual who is not resident in the UK is using the recycling device will not, by itself, be relevant to whether the recycling rule will apply. The unauthorised payments charge, unauthorised payments surcharge (if applicable) and the scheme sanction charge will also apply.

Recycling and members of overseas pension schemes

The "member payment charges" in Schedule 34 of Finance Act 2004 apply the unauthorised payments charge to members of certain overseas pension schemes that have benefited from UK tax relief as if the overseas pension scheme were a registered pension scheme. This means that the recycling rule could potentially be triggered where, for example:

• an individual takes a pension commencement lump sum from a registered pension scheme and recycles it into an overseas pension scheme (if tax relief were available on the recycled contribution), or
• an individual benefiting from migrant member relief recycles a pension commencement lump sum from an overseas pension scheme into the same or another overseas pension scheme, or a UK registered pension scheme.