RPSM04104810 - Technical Pages: Taxation: Unauthorised payments: Scheme sanction charge: Liability

Liability to the scheme sanction charge

The scheme administrator is liable to a charge to income tax, known as the scheme sanction charge, in any tax year that a registered pension scheme makes one or more scheme chargeable payments. RPSM04104830 explains what a scheme chargeable payment is.

A payment can be still classed as made by a scheme even if the payment is made after the scheme has wound up. Under section 161(3) and (4) a payment is treated as having been made by a registered pension scheme if the payment is made from an investment acquired using funds held for the purposes of a registered pension scheme even if that investment was acquired after the scheme wound up.

Where a payment is treated as a payment from a scheme that has wound up by virtue of section 161(3) and (4) the person liable to the scheme sanction charge is the person(s) who was the scheme administrator immediately before the scheme wound up.

A person is liable to the scheme sanction charge even if they or any other person who is also liable to the scheme sanction charge are not resident, ordinarily resident or domiciled in the United Kingdom.

The amount of the scheme sanction charge is set out on RPSM04104820.

RPSM04104831 gives an example.

Relief from liability on restitution by order of court or Pensions Regulator

A scheme administrator can claim relief from the scheme sanction charge where an amount is paid back (or transferred) to the scheme in specified circumstances. RPSM04104860 gives more information.

Discharge of liability on good faith grounds

A scheme administrator can apply to have their liability to be discharged in certain circumstances – see RPSM04104870.