RPSM04102030 - Technical Pages: Taxation: Authorised employer payments: Taxation of authorised surplus payments

How are authorised surplus payments taxed?

When a registered pension scheme that is an occupational pension scheme makes an authorised surplus payment to a sponsoring employer, the payment is subject to an income tax charge called the authorised surplus payments charge. However, the charge does not apply if

• apart from the authorised surplus payments charge, the sponsoring employer receiving the payment would have been exempt, or entitled to claim exemption, from income tax or corporation tax in respect of the payment, or
• the sponsoring employer receiving the payment is a charity (as defined in s506 ICTA 1988), or
• the authorised surplus payment is being made in relation to a scheme that is winding-up and that winding-up started before 19 March 1986.

The person liable for the charge is the scheme administrator of the scheme making the payment. The scheme administrator remains liable even if they, or the sponsoring employer, or both, are not resident, ordinarily resident or domiciled in the United Kingdom.

The amount of tax is due is 35% of the amount of the authorised surplus payment.

The authorised surplus payments charge is a free-standing tax on the scheme administrator and an authorised surplus payment is not to be treated as income under any other tax provision. This means that the tax is due even if the employer receiving the payment is making a loss.