PSI17.2.57 - Tax Treatment of Approved Schemes and Payments by Approved Schemes: Taxation of Payments to Scheme Members - Pension Sharing on Divorce - Tax on Certain Commutation payments

(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)

[PN17.29]

Where a member’s entire pension is commuted

• on the grounds of triviality (see PSI8.3.2-11), or
• because of the member’s exceptional circumstances of serious ill health (see PSI8.3.15-22), and
• the member’s benefit entitlement in the scheme has been the subject of a pension sharing on divorce order (see PSI3.5.4)

there is a tax charge under section 599 ICTA 1988 (see PSI 17.2.16) but the way in which the tax liability is calculated differs from that for a member whose benefits have not been subjected to a pension sharing on divorce order (see PSI 17.2.18).

Note the modified calculation of the tax liability applies to all members whose benefits in the scheme have been the subject of a pension sharing on divorce order, including moderate earners (see PSI6.5.90).