RPSM13102120 - Technical Pages: International: Application of charges to non-UK schemes: Member payment charges and taxable property unauthorised payment charge: Relieved members and transfer members

Relieved members and transfer members of a relevant non-UK scheme

Paragraphs 1 to 7 of schedule 34 provide for the member payment provisions that apply to payments from registered pension schemes to apply to payments made (or treated as made) from a relevant non-UK scheme to or in respect of:

• a relieved member ( RPSM13102140 refers) of a relevant non-UK scheme ( RPSM13102130 refers), and
• a transfer member ( RPSM13102160 refers) of a relevant non-UK scheme.

But the member payment charges apply to them only if:

• they are tax resident in the UK at the time the payment is made (or is treated as made), or
• although not tax resident in the UK, they have been resident in the UK earlier in the tax year in which the payment is made (or is treated as made), or in any of the five tax years immediately preceding that tax year.

The reference above to "treated as made" reflects the wide definition of "payment" set out in section 161(2) ( RPSM09100160 refers). Broadly speaking, that section defines a payment as including a transfer of assets (either directly or indirectly) and any transfer of money’s worth. It extends payment to transactions where there is no actual payment but an unauthorised payment is deemed to be made, for example the provisions regarding value shifting ( RPSM07106010 refers), the use of scheme assets and assignment. It treats payments made by a scheme to a person connected to a scheme member (who is neither a member nor a sponsoring employer) as effectively a payment to that scheme member. It also refers to payments "to and in respect of" a member, treating either such payment as one and the same. A full explanation can be found at RPSM09100160.

A transfer from a relevant non-UK scheme of the rights of a relieved member or a transfer member to a scheme that is neither a registered pension scheme nor a qualifying recognised overseas pension scheme (see RPSM14101050) will constitute an unauthorised payment. It will therefore give rise to a member payment charge unless the individual meets the non- residence conditions referred to above when the transfer is made.

The UK tax residence test under schedule 34 is a test of residence status in a particular tax year (or part of a tax year). The IR20 tests apply for the purposes of determining an individual’s tax liability and applying, or not applying, a member payment charge.