PSI17.2.61 - 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 –– pension credit benefits

(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)

[PN17.30]

Where the pension payable to an ex-spouse member is fully commuted for triviality or because of exceptional circumstances of serious ill health (see PSI24.1.5) and

• the pension credit rights are the only benefits held under the scheme for the ex-spouse member (see PSI24.1.2), or
• the scheme makes provision for pension credit rights to be treated as provided separately from any benefits that the ex-spouse member might have in the same scheme as a result of being an employee member (see PSI24.1.6-7)

tax under section 599 is charged at a rate of 20% on the amount by which the commutation payment exceeds

• the largest lump sum that would otherwise have been receivable by commutation of any part (but not the whole) of the pension payable under the scheme rules from the pension credit benefit (see PSI24.2.4).