RPSM07102210 - Technical Pages: Investments: Non arms length transactions: Benefits in kind
General
| S173 |
Because of the tax consequences of investing in taxable property
(see
RPSM07109000) it is anticipated that
there will be limited opportunity for
members to use scheme assets, The following rules
do not apply in the case of taxable property held by an
investment-regulated pension scheme.
However other schemes may still hold assets that will be
capable of being used by a person who is, or has been, a scheme
member. If, however, such persons were allowed to use them tax-free
this would have a number of unacceptable consequences:
- It could alter the investment strategy of the scheme.
- It would allow members to enjoy benefits other than pension related benefits from pension scheme funds tax-free when they have already had tax relief on contributions and investment build up.
- Use of wasting assets would extract value from the fund without any tax charge on the members.
Therefore, where a person who is, or has been, a scheme member,
or a member of their family or household has scheme assets provided
for personal use, the cash equivalent of the benefit in kind will
be charged on the member as an unauthorised payment. This also
applies where a registered pension scheme has been wound up since
the investment was acquired.
The Registered Pension Schemes (Provision of Information)
Regulations 2006 (S.I. 567/2006) require that a registered pension
scheme must report any benefits provided on the annual event report
(see
RPSM12301020).
In addition, the
scheme administrator must give details of any
benefits provided to the member before 7 July following the end of
each tax year to enable the member to declare the unauthorised
payments received on their individual Self-Assessment returns.
For these purposes, a member includes
- a pensioner member,
- an active member,
- a deferred member, and
- a pension credit member.
The following are members of a person’s family as determined by Section 721 Income Tax (Earnings and Pensions) Act 2003 (ITEPA) -
- the person’s spouse or civil partner,
- the person’s children and their spouses or civil partners,
- the person’s parents, and
- the person’s dependants.
And the following are members of a person’s household
- the person’s domestic staff, and
- the person’s guests.
Where, after the death of a person who is, or has been, a scheme member’, an asset held by the registered pension scheme is used to provide a benefit to a person, who, at the time of the person’s death, was a member of the person’s family or household, an unauthorised payments charge will be made on the person receiving the benefit.
| Glossary ( RPSM20000000) |
