RPSM04104510 - Technical Pages: Taxation: Unauthorised payments: Unauthorised payments charge

The unauthorised payments charge

Unauthorised payments are liable to an income tax charge known as the unauthorised payments charge.

Unauthorised member payments

• The person liable to the charge is the member, or former member, who received the payment or in respect of whom the payment was made - if the payment was made when the member, or former member, was alive, or
• the person who receives the payment - if the payment was made after the death of the member' or former member.

Unauthorised employer payments

The person liable to the charge is the sponsoring employer, or former sponsoring employer, who received the payment or in respect of whom the payment was made.

If more than one person is liable then those persons are jointly and severally liable to the charge in respect of the payment. Joint and several liability means that all parties to the charge are equally liable to the whole charge, and that payment by one will discharge the liability of the other(s), to the extent of the amount paid.

A person is liable to the unauthorised payments charge even if

• they, or
• any other person who is also liable to the unauthorised payments charge, or
• the scheme administrator

are not resident, ordinarily resident or domiciled in the United Kingdom.

The tax charge is at a rate of 40%, based on the amount of the unauthorised payment.

The charge is a free-standing tax charge, which means, for example, any losses a taxpayer may have cannot be set against the tax charge.

RPSM04104530 gives an example.