RPSM07109240 – Technical pages: Investments: Taxable property: Direct holding of taxable property: Amount and timing of charges on acquisition/improvement/conversion of directly held property?

Amount and timing of charges on acquisition/improvement/conversion of directly held property?

RPSM07109220 explains that an unauthorised payment charge arises when an investment-regulated pension scheme uses tax relieved funds to acquire, improve, convert or adapt taxable property. RPSM071090230 explains that events in RPSM07109220 create one or more unauthorised payments to a member. The amount and timing of the unauthorised payment is set out in the following paragraphs.

Where an investment-regulated pension scheme acquires a direct interest in taxable property the unauthorised payment is treated as made when the interest in the taxable property is acquired by the scheme.

The total taxable amount of the unauthorised payment is,

the amount of consideration, in money or money's worth, given directly or indirectly for the interest, plus

the amount of any fees and other costs incurred in connection with the acquisition.

Typically this will be the purchase price for the property plus related legal and professional fees and other costs such as stamp duty. But it also covers other acquisitions, for example, by use of an option. If, say, a pension scheme buys an option for £1m that can be exercised to buy a taxable property for £1 the acquisition cost, excluding fees, etc., is £1,000,001, the amount of consideration given directly or indirectly. The option constitutes an interest in taxable property in accordance with RPSM07109130.

In most cases it is the actual amount incurred that is charged. However there are two exceptions.

• if the property is acquired through a transfer from a registered pension scheme that is not an investment-regulated pension scheme it is treated as an acquisition at market value.
• if the property is received by the pension scheme as part of an in specie contribution (see RPSM07109220) it is treated as being acquired for the value of that contribution.