RPSM04302030 - Administrator Pages: Taxation: Appeal and claims rights and similar rights of the scheme administrator: Right to apply for relief from a scheme sanction charge

Right to claim relief from a scheme sanction charge

Relief from a scheme sanction charge

One of the tax charges that a scheme administrator is liable for under Part 4 of Finance Act 2004 is the scheme sanction charge. One of the instances where the scheme sanction charge can apply is when an unauthorised member payment is made by a registered pension scheme.

Where the court or the Pensions Regulator has made a restitution order under the relevant DWP legislation in respect of an unauthorised member payment, the scheme administrator may claim relief. The relevant DWP legislation is section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005.

The remainder of this section deals with the making of an application for a claim for relief from a scheme sanction charge liability and not with applications for a discharge of a scheme sanction charge. More information about applying for a discharge of the scheme sanction charge is set out in RPSM04302020.

Under what circumstances can a scheme administrator claim relief?

A scheme administrator of a registered pension scheme can claim relief in respect of a scheme sanction charge when:

• the scheme administrator has become liable to a scheme sanction charge in respect of an unauthorised member payment, and
• an amount is paid to the scheme or any other registered pension scheme, either in cash or in specie, pursuant to a restitution order

When can the claim be made?

The claim for relief must be made within one year of the funds being restored to the registered pension scheme.

How much relief can be claimed?

The scheme administrator can claim relief in respect of the “relevant proportion” of the scheme sanction charge. The relevant proportion is determined by dividing the amount paid in accordance with the restitution order by the amount of the unauthorised member payment. Normally the amount paid under the restitution order will be less than the amount of the unauthorised member payment but if the amount paid under the order is greater, relief from the whole of the scheme sanction charge can be claimed.

Making the claim for relief

The claim must be made in writing to an Officer of HMRC and must

• show the amount of income tax which will be required to be repaid in order to give effect to the claim, and
• include any relevant event reports or accounting returns that have not previously been supplied
• provide evidence of the amount of income tax that has been paid in respect of the scheme sanction charge to which the claim for relief relates
• include a copy of the restitution order and, if it is not clear from the face of the restitution order, show the amount that was required to be repaid to the scheme by the restitution order
• show the amount that has actually been repaid to the scheme pursuant to the restitution order together with documentary evidence of repayment. The documentary evidence might, for example, be copies of the bank statements of the person making and the person receiving the payment or a copy of a cleared cheque
• contain a declaration to the effect that all of the particulars given are correctly stated to the best of the information and belief of the applicant.

The claim should normally be made by the scheme administrator but exceptionally, the trustee, guardian or receiver may make an application in respect of an incapacitated person. For this purpose an incapacitated person is defined in section 118 of Taxes Management Act 1970.

Errors and mistakes

If the applicant subsequently discovers that a claim for relief from a scheme sanction charge contains an error or a mistake then they may make a supplementary claim in the same manner and within the same time limit as was allowed when they made the original claim.

HMRC decisions on receiving a claim for relief from a scheme sanction charge

On receiving a claim from the scheme administrator, HMRC must decide whether to make enquiries into the claim or not.

Where there are no enquiries then an officer of HMRC will give effect to the claim by repayment of the income tax as soon as is practicable after the claim is made. Where there are enquiries a closure notice will be issued upon completion of the enquiry.

The scheme administrator's right of appeal against any decision contained in the closure notice is set in RPSM04302060.