RPSM04302020 - Scheme Administrator Pages: Taxation: Appeal and claims rights and similar rights of the scheme administrator: Right to apply for a discharge from a scheme sanction charge

Right to apply for a discharge from a scheme sanction charge

[Section 268 and The Registered Pension Schemes (Discharge of Liabilities under Sections 267 and 268 of the Finance Act 2004) Regulations 2005 - SI 2005/ 3452] 

One of the tax charges that a scheme administrator is liable for under Part 4 of Finance Act 2004 is the scheme sanction charge. The charge applies when a scheme chargeable payment is made by a registered pension scheme.

Where a scheme administrator of a registered pension scheme is liable to the scheme sanction charge in respect of a scheme chargeable payment, the scheme administrator may apply, in writing, to HMRC to have the liability discharged. If the scheme administrator is liable to scheme sanction charges in respect of more than one scheme chargeable payment then a separate application to be discharged must be made in respect of each scheme chargeable payment.

The application should normally be made by the person liable to the scheme sanction charge but, exceptionally, the trustee, guardian or receiver may make an application in respect of an incapacitated person. For this purpose an incapacitated person is defined in section 118 of Taxes Management Act 1970.

Grounds for applying for a discharge from a scheme sanction charge

Any application for a scheme sanction charge to be discharged must set out the particulars of the ground relied on in the discharge application.

The only grounds on which HMRC will consider a discharge of a scheme sanction charge liability in response to an application by the scheme administrator are -

• where a scheme chargeable payment that is treated as being an unauthorised payment by section 172 Finance Act 2004 (assignment), it would not be just and reasonable for the scheme administrator to be liable to the scheme sanction charge, taking into account all of the circumstances of the case, and
• in all other cases, that the scheme administrator reasonably believed that the unauthorised payment was not a scheme chargeable payment and that in all the circumstances of the case, it would not be just and reasonable for the scheme administrator to be liable to the scheme sanction charge.

Time limit for making an application for a discharge from a scheme sanction charge

The time limit for making an application for a discharge from a scheme sanction charge on the scheme administrator is:

• where there has been an assessment made under section 36 Taxes Management Act 1970 (sometimes known as a 'discovery assessment'), within two years of the date on which the assessment was made.
• where there has been no discovery assessment and the scheme administrator is a company, no later than 6 years after the end of the accounting period to which the application relates
• where there has been no discovery assessment and the scheme administrator is not a company, no later than five years after 31^s t January next following the year of assessment to which the application relates

Errors and mistakes

If the applicant subsequently discovers that an application for a discharge from a scheme sanction charge contains an error or a mistake, they may make a supplementary application in the same manner and within the same time limit as was allowed when they made the original application.

HMRC decisions on receiving an application for a discharge from a scheme sanction charge

On receiving an application from the scheme administrator HMRC must decide whether to discharge the scheme administrator's liability to the scheme sanction charge.

The scheme administrator's right to be notified about the HMRC decision is set out in RPSM04302050 and their rights of appeal against the decision are set in RPSM04302060.