RPSM04106060 - Technical pages: Taxation: Inheritance tax and unauthorised payment tax charges on alternatively secured pension funds and dependants' alternatively secured pension funds

This guidance only applies to individuals who died before 6 April 2011. If the member reached age 75 between 22 June 2010 and 5 April 2011 you should also see RPSM17100070.

For deaths or omissions to exercise pension rights that occur on or after 6 April 2011 see guidance in the Inheritance Tax Manual at IHTM17000.

Death on or after 6 April 2007: Example where tax charges are due in respect of both inheritance tax and an unauthorised payment in relation to remaining dependants’ alternatively secured pension funds after the death of a dependant where the member also died after age 75

Ian is a member of a registered pension scheme and has an arrangement under that scheme which provides alternatively secured pension. Ian has no other pension arrangements in this or any other registered pension scheme that provide alternatively secured pension or any other type of pension benefit.

Ian dies on 1^st June 2007, age 82.

The value of Ian’s alternatively secured pension fund immediately before death is £300,000.

Ian leaves a dependant (who is under age 75) and all of the remaining alternatively secured pension funds of £300,000 are used to provide a dependants’ unsecured pension within 6 months of Ian’s death.

The scheme administrator sends information about Ian’s alternatively secured pension fund to HMRC Inheritance Tax using form IHT105; the deadline for submitting the form being 12 months after the end of the month in which Ian died.

• The value of Ian’s chargeable estate for inheritance tax purposes, excluding the remaining alternatively secured pension funds at the date of Ian’s death, is £300,000. After taking into account the inheritance tax ‘nil-rate band’ of £300,000 for the tax year 2007/2008, there is no inheritance tax due in respect of that part of Ian’s estate. However, as Ian’s remaining alternatively secured funds were applied in full for the provision of dependants’ unsecured pension within 6 months of Ian’s death, there is no immediate requirement to consider whether or not any inheritance tax might be due in respect of those funds. Such consideration waits until the earlier of the death of Ian’s dependent, or
• Ian’s dependant ceasing to receive any benefits

and some of those dependants’ unsecured pension funds remain (or some of what were those dependants’ unsecured pension funds remain but as dependants’ alternatively secured pension funds because Ian’s dependant had reached age 75 and the unsecured pension funds in question had been moved into alternatively secured pension funds).

See RPSM04106061 for the continuation of this example.