RPSM04102050 - Technical Pages: Taxation: Authorised employer payments: What are scheme administration employer payments?

What are scheme administration employer payments?

Scheme administration employer payments are payments made

• by a registered pension scheme that is an occupational pension scheme,
• to or in respect of a sponsoring employer or a former sponsoring employer
• for the purposes of administration or management of the scheme.

Examples of scheme administration payments could be

• the payment of wages to people involved in administering the scheme, or
• payments made for the purchase of a pension scheme asset.

Payments for the administration or management of the scheme should be made on an arm’s length, commercial basis. If a payment is more than would be expected to be paid on an arm’s length basis the amount over the expected arm’s length price will not be a scheme administration employer payment. Any excess will be an unauthorised employer payment, and taxed accordingly - see RPSM04104020.

Loans to or in respect of a sponsoring employer or a former sponsoring employer are not scheme administration employer payments. There are particular rules for loans to or in respect of sponsoring employers - see RPSM07103050.

Payments made to acquire shares in a sponsoring employer are not scheme administration employer payments if either

• the market value of the shares in the sponsoring employer held by the pension scheme is 5% or more than the total value of the funds held by the pension scheme, or
• the total market value of the shares held by the pension scheme in any and all of the sponsoring employers under the pension scheme is 20% or more than the total value of the funds held by the pension scheme.

Payments in either of these circumstances will be unauthorised employer payments and taxed accordingly.