Unauthorised payments charge meaning

Morgan Lloyd Trustees Ltd v HMRC [2025] UKUT 102 (TCC) The company acted as trustee to small, self‑administered pension schemes (SSASs) established by more than 500 employers, who then entered into arrangements with their SSASs aimed at releasing cash. The structures adopted were either loans, secured by charges over various intellectual property (IP) items—such as domain names, websites and trade marks—or, alternatively, sale and leaseback, or sale and licence‑back, deals concerning comparable IP assets. HMRC took the view that many employers had received unauthorised employer payments and accordingly issued assessments to unauthorised payment charges and surcharges. In addition, HMRC assessed MLT to scheme sanction charges. MLT applied to HMRC for discharge of the charges under FA 2004, s 268; however, HMRC refused certain applications and concluded that others were submitted outside the time limit. MLT and the employers appealed to the FTT, which dismissed all of the appeals. The first issue for the UT was the extent...

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Foulkes v Revenue and Customs Commissioners [2024] UKFTT 322 (TC) What are the practical implications of this case? Grasping the significance of this ruling will support practitioners in guiding clients on the tightly defined regime in FA 2004 concerning which payments registered pension schemes are permitted to make and the ramifications of any unauthorised payments. The purpose of the framework is to ensure that tax reliefs and exemptions on contributions to a registered pension scheme apply only where the scheme genuinely provides for members’ retirement benefits. The sole payments a registered pension scheme may make to an individual who is, or has been, a member are those set out in FA 2004, s 164. If an unauthorised member payment is made, FA 2004, s 208 imposes an income tax charge at 40% on the recipient, referred to as the ‘unauthorised payments charge’. Additionally, section 209 establishes a further income tax charge termed the ‘unauthorised payments surcharge’. It becomes payable where the unauthorised...

Broadly speaking, tax applies to UK registered pension schemes in three different areas: the tax treatment of member and employer contributions, including any repayment of member contributions the tax treatment of assets held by the scheme, including the investment returns generated by those assets the tax treatment of benefits paid out by the scheme Where an individual participates in more than one registered scheme, the contributions paid to—and the benefits received from—each arrangement are combined and considered together when establishing that person’s overall tax liability. This Practice Note concerns registered private sector pension schemes. Public sector pension schemes are predominantly governed by separate legislation. Their tax position is broadly similar, though not invariably the same, as that which applies to registered private pension schemes...

Since A‑day (6 April 2006), key features of the UK tax regime for employees and others in foreign pension schemes are: Migrant member tax relief may reduce UK tax on contributions to a ‘qualifying overseas pension scheme’ (QOPS) in specified cases. See: UK tax relief on pension contributions to an overseas pension scheme—migrant relief, below Members of overseas pension schemes (OPS) or relevant non‑UK schemes (RNUKS) can incur UK tax charges in some situations, even if not UK resident. See: Tax treatment of pension benefits paid by a foreign pension scheme (not being a HMRC‑registered pension scheme), below Overseas individuals in HMRC‑registered pension schemes are subject to different rules. See: Tax treatment of overseas individuals who are members of HMRC‑registered pension schemes, below. UK tax relief on pension contributions to an overseas pension scheme—migrant relief UK tax relief is not automatic on contributions paid by, or for, an individual to an overseas pension scheme (OPS), a qualifying non‑UK pension scheme (QNUPS),...

THIS PRACTICE NOTE LOOKS AT PENSIONS REDUCTION IN THE CONTEXT OF ONGOING REGISTERED DEFINED BENEFIT PENSION SCHEMES Reducing a member’s pension entitlement (that is, cutting accrued benefits or a pension already in payment) within a continuing defined benefit occupational scheme gives rise to complex questions in modern pensions law, and there are several hurdles to clear—or navigate around—before any reduction can lawfully occur. Key obstacles include: sections 91–93 of the Pensions Act 1995 section 67 of the Pensions Act 1995 the provisions of the scheme’s governing documentation Further, decreasing a pension in payment may create adverse consequences under the pensions tax regime, which must be weighed carefully before proceeding (see Reducing pensions in payment—position under the pensions tax regime below). A reduction might be considered in various contexts, for example scheme restructuring or reclaiming overpayments, and both legal and tax impacts should be evaluated before any step is taken. For more illustrations of pensions reduction, see Common scenarios of pensions...