(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
[PN17.25-26]
Section 599 ICTA 1988 tax is chargeable only where there is a
scheme rule permitting a member’s entire pension to be
commuted. In a scheme in which the member is in contracted-out
employment, where the retirement is on grounds of serious ill
health, the GMP or Protected Rights may not be commuted. Since full
commutation is not possible in these circumstances, the charge to
tax will not apply. The position here will depend on whether the
member’s GMP or Protected Rights are retained within the
scheme or a premium is paid by the employer to reinstate the GMP or
Protected Rights liability back into the State Scheme (see
PSI6.1.10-11). This is,
however, a matter for Compliance Audit Section to deal with. In
contrast, GMPs and Protected Rights are commuted on grounds of
triviality so full commutation is possible and, therefore, the
section 599 charge applies.
