RPSM13102465 - Technical Pages: International: Application of charges to non-UK schemes: Special annual allowance: Total adjusted pension input amount: Avoidance scheme

This guidance only applies for the 2009-10 and 2010-11 tax years.

[Para 6, Sch 35, FA 2009] [The Special Annual Allowance Charge (Application to Members of Currently-Relieved Non-UK Pension Schemes) Order 2009 - SI 2009/2031] 

Article 6 of SI 2009/2031 modifies paragraph 6 of Schedule 35 to FA 2009 (on which there is guidance at RPSM15105050). Briefly, paragraph 6 provides how an individual’s total adjusted pension input amount is to be calculated where there is a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, annual allowance charge or lifetime allowance charge. The amount calculated under paragraph 3(2) of Schedule 35 (see RPSM15105040) is to be substituted by the amount calculated on a different basis under paragraph 6(3) of Schedule 35 if that is greater.

Broadly speaking, under paragraph 6(3) the amount is calculated by deducting:

1. the arm’s length assignment value of the individual’s rights under the arrangement at the beginning of the tax year, from
2. the arm’s length assignment value of the individual’s rights (as adjusted by section 236 FA 2004) under the arrangement at the end of the tax year.

Article 6 provides in such circumstances for the modification of the calculation of both of those amounts under an arrangement under a currently-relieved non-UK pension scheme. The amount calculated under paragraph 3(2) is as modified by article 5 of these regulations (RPSM13102460).

The amount calculated under paragraph 6(3) is modified to be the appropriate fraction of what it would otherwise be. The appropriate fraction is the same as applies in the calculation of an individual’s pension input amount under a defined benefits arrangement or a cash balance arrangement (see RPSM13102350 and RPSM13102355).

Article 6 provides also for the modification of section 236 where it is applied in b above. The references to “amount” in subsections (2), (3) and (5) are to be read as references to an amount referable to a member’s UK tax-relieved fund only (see RPSM13102150).

The adjustments of the value of an individual’s rights under section 236(2) (3) and (5) relate to the occurrence in the tax year of a pension debit, a pension credit and a transfer from the arrangement to a registered pension scheme or a qualifying recognised overseas pension scheme. The UK tax-relieved fund of a member of a currently-relieved non-UK pension scheme is the aggregate amount of their pension input amounts (RPSM13102460) in each tax year after 5 April 2006.