RPSM02105050 - Technical pages: Registering a pension scheme with HMRC: de-registration: Tax position on and after de-registration

Tax position on and after de-registration

De-registration charge

A tax charge applies on de-registration of the pension scheme.

This, broadly speaking, recoups tax reliefs given to the scheme while registered (for example, on contributions, investment returns, disposals of investments and so on).

The tax charge is an amount equal to 40% of the total of the following

• the market value, immediately before it ceased to be a registered pension scheme, of the assets held for the purposes of the scheme, plus
• the sums held for the purposes of the scheme immediately before it ceased to be a registered pension scheme.

The scheme administrator immediately before the scheme ceased to be a registered pension scheme is liable for the de-registration tax charge, regardless of that scheme administrator's residence or domicile status for UK tax purposes.

If more than one person is the scheme administrator at that time, 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 who 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.

Unauthorised payment

At arrangement level, if there is an unauthorised payment, there is a tax charge on either the member or the sponsoring employer, as appropriate. Where the payment relates to a deceased member, the charge is on another person instead of the member.

There may also be a tax charge on the scheme administrator.

Scheme taxation

A pension scheme which has ceased to be a registered pension scheme no longer qualifies for the tax reliefs detailed at RPSM02103010. If it is not wound up, it may continue as a non- registered pension scheme. If it is an occupational pension scheme, it may become subject to the provisions relating to employer-financed retirement benefits scheme.

Any life assurance business of a company which was entered into for the purposes of a registered pension scheme ceases to be pension business at the beginning of the company's period of account in which the pension scheme ceases to be a registered pension scheme. Treating the business as non-pension business throughout the whole period of account avoids complication when calculating the figures for the company's regulatory return.