Unauthorised payments surcharge meaning

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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...

Trachtenberg v Revenue and Customs Commissioners [2025] UKUT 206 (TCC) What are the practical implications of this case? Following the UT’s rejection of Mr Trachtenberg’s appeal, and its conclusion that HMRC do have authority to assess income tax chargeable under FA 2004, ss 208 and 209 through the TMA 1970, the assessments issued by HMRC are lawfully made and HMRC are empowered to recover income tax where it has not been self-assessed. If the appeal had succeeded, the practical consequences would be hard to determine, because HMRC have already issued many hundreds, if not thousands, of income tax assessments under FA 2004, ss 208 and 209, relating to unauthorised payments made by a pension scheme that are liable to the unauthorised payments charge and the accompanying surcharge. Accordingly, HMRC’s assessments stand as validly raised, and the department retains power to collect amounts due where taxpayers have not self-assessed them...

There is no overall cap on the benefits a registered pension scheme may provide. Nevertheless, under the Finance Act 2004 (FA 2004), if a scheme makes an unauthorised payment: tax liabilities will usually arise for both the individual receiving the payment and the scheme itself. For more detail, see Tax charges on making unauthorised payments, below in the worst case, the scheme could face de-registration, leading to the loss of its tax-privileged status. For more detail, see De-registration and the de-registration charge, below specific reporting obligations will apply. For more detail, see Reporting requirements and penalties, below In certain situations, HMRC may grant a discharge from some of the tax charges linked to unauthorised payments. For guidance, see Applying to HMRC for discharge from tax charges, below. Further exceptions to the standard unauthorised payments position exist and are set out in Practice Note: Unauthorised payments: exceptions. For an explanation of what constitutes an unauthorised payment, see Practice Note: Authorised and unauthorised payments...