RPSM02100040 - Technical pages: Registering a pension scheme with HMRC: pension schemes which exist at 5 April 2006: Tax position on opting out of automatic registration

Tax position on opting out of automatic registration

A pension scheme which is not registered does not qualify for the tax reliefs at RPSM02103010. If it is a scheme established for the benefit of particular employees, it will be taxed as an employer-financed retirement benefits scheme (see the guidance in the Employment Income Manual at EIM15000).

There is a tax charge on opting out. This - broadly speaking - recoups tax reliefs given to the scheme up to the date of opting out (for example, on contributions, investment returns, disposals of investments and so on). The tax charge is an amount equal to 40% of the market value of the pension fund, being assets or other sums held for the purposes of the scheme immediately before 6 April 2006.

Any life assurance business of a company which was entered into for the purposes of the pension scheme ceases to be pension business at the beginning of the company's period of account in which the pension scheme opts out of automatic registration. The date of opting out for this purpose is 6 April 2006.

The relevant administrator at 5 April 2006 is liable for the tax charge. The identity of the relevant administrator differs according how the scheme was classified under the legislation in force on 5 April 2006, as follows -

• "occupational pension schemes" (bullets 1, 4 and 5 on RPSM02100020) - whoever is the scheme administrator under the legislation in force for these types of scheme at 5 April 2006 (section 611AA ICTA 1988).
• "personal and stakeholder pension schemes" (bullet 2 on RPSM02100020) - whoever is the scheme administrator under the legislation in force for these types of scheme at 5 April 2006 (section 638 ICTA 1988)
• "retirement annuities" (bullet 3 on RPSM02100020) - the trustee(s) of the scheme, or the insurance company which is a party to the contract in which the pension scheme is comprised.

If more than one person is the scheme administrator at 5 April 2006, each person is jointly and severally liable for the tax due. This means that each person can be asked to pay the whole amount of tax due. If one person pays part of the tax due, all persons are discharged from liability in respect of that part of the tax which has been paid - but all persons, including the one which made the part payment, would still each be liable to pay the whole of the remaining amount due. If the tax liability is met in full by one or more persons, all persons concerned are discharged from liability for the full amount.