RPSM04104910 - Technical Pages: Taxation: Unauthorised Payments: Recycling of pension commencement lump sums: Overview of Recycling

Recycling

Recycling of a pension commencement lump sum involves using that lump sum as the means to increase contributions significantly to a registered pension scheme. The recycling rule is intended to prevent the systematic exploitation of the tax rules for registered pension schemes to generate artificially high amounts of tax relief by using the pension commencement lump sum to make a further, tax relieved, contribution to a registered pension scheme.

RPSM04104920 explains when the recycling rule applies.

When the recycling rule applies all or part of the pension commencement lump sum is treated as an unauthorised member payment for tax purposes. RPSM04104970 gives further guidance on the tax treatment of the deemed unauthorised payment.

If, having obtained the facts, an HMRC officer considers that the recycling rule does or might apply to a particular individual, that officer must make a report to the Technical Team, Pension Schemes Services, FitzRoy House, Castle Meadow Road, Nottingham NG2 1BD before taking the matter further with the individual.