RPSM13102190 - Technical Pages: International: Application of charges to non-UK schemes: Member payment charges and taxable property unauthorised payment charge: Attributing payments to particular funds

Attributing payments to particular funds under a relevant non-UK scheme

Regulation 4 of The Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (SI 2006/207), as amended by the Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) (Amendment) Regulations 2006 provides how to determine whether or not payments made (or treated as made) by a relevant non-UK scheme are to be treated as referable to a member's UK tax-relieved fund or relevant transfer fund. For these purposes it must be assumed that

1. payments made by the scheme to, or in respect of, the member are made out of the member's UK tax-relieved fund in priority to any other fund under that scheme; and
   
   
2. the amount of the member's UK tax-relieved fund is reduced by the amount paid out of the scheme.

If the member's UK tax-relieved fund is nil, or has been reduced to nil, it will be assumed that the four rules set out in RPSM13102195 will apply (with an earlier rule applying in preference to a later rule). They provide broadly that payments are made out of the member’s relevant transfer fund and taxable asset transfer fund before any other fund under the scheme.

This enables an individual to discharge their UK tax obligations at the earliest date possible.

RPSM13102200 gives some examples.

Monies are regarded as paid by a pension scheme when they leave the scheme to buy an annuity regardless of when the annuity payments commence.

An individual receiving transitional relief (see RPSM13101100) after 5 April 2006 who is able to make an in-service withdrawal from their corresponding scheme will need to take into account that these attribution rules will apply. So such a payment could give rise to a member payment charge. The attribution of payments will no longer be left to scheme administrators and members where they have signed undertakings that no in-service withdrawal will be made from contributions made in respect of UK service. Those corresponding scheme undertakings will not be regarded as having been breached where an in-service withdrawal is deemed to have come from the member's UK tax-relieved fund under the above attribution rules.