RPSM04104530 - Technical Pages: Taxation: Unauthorised payments: Unauthorised payments charge: Example

Example of the unauthorised payments charge

Tom is a member of an occupational pension scheme. On 7 July 2008 Tom receives an unauthorised member payment from his scheme of £10,000.

On 31 December 2008 Tom’s wife Karen also receives an unauthorised payment of £10,000 from the scheme. This payment is also an unauthorised member payment as it was made in respect of Tom’s membership of the scheme.

So in the 2008-2009 tax year the total of the unauthorised member payments made to or in respect of Tom is £20,000. As Tom is still alive, he is liable to an unauthorised payments charge on the whole £20,000 even though he only received £10,000.

The amount of the unauthorised payments charge is £8,000 (40% of £20,000).

The scheme administrator of Tom’s scheme reports the payments to HMRC on an Event Report within the required time limit (by 31 January 2010).

Tom declares the payments on his Self Assessment return for the 2008-2009 tax year.