RPSM04104050 - Technical Pages: Taxation: Unauthorised payments: Overview: What is an unauthorised employer payment?

What is an unauthorised employer payment?

An unauthorised employer payment is,

• a payment by a registered pension scheme that is an occupational pension scheme to or in respect of a sponsoring employer, or former sponsoring employer, which is not an authorised employer payment, or
• anything which is to be treated as an unauthorised payment to a sponsoring employer, or former sponsoring employer, under section 181 of Finance Act 2004 (Value Shifting).

The definition covers not only payments to a sponsoring employer, but also payments in respect of a sponsoring employer or former sponsoring employer. So even if an employer or former employer does not receive the payment it can still be liable to an income tax charge in respect of the unauthorised payment.

Example

MR Ltd is a sponsoring employer in the MegaCo pension scheme. The pension makes a payment of £1 million to MegaCo Ltd, which is the parent company to MR Ltd. MegaCo Ltd does not have any employees and is not a sponsoring employer in the pension scheme. Even though MR Ltd has not received the £1 million payment it is a payment made in respect of MR Ltd. So the £1 million payment is an unauthorised employer payment and MR Ltd is liable to an unauthorised payments charge and, possibly, the unauthorised payments surcharge in respect of the payment.