Unauthorised payments—tax charges and reporting requirements
Produced in partnership with Mark Smith and Georgina Wardrop of Taylor Wessing LLP and Martin Scott of gunnercooke LLP
Unauthorised payments—tax charges and reporting requirements

The following Pensions practice note produced in partnership with Mark Smith and Georgina Wardrop of Taylor Wessing LLP and Martin Scott of gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Unauthorised payments—tax charges and reporting requirements
  • Tax charges on making unauthorised payments
  • Unauthorised payments charge and surcharge
  • Scheme sanction charge
  • De-registration and the de-registration charge
  • Applying to HMRC for discharge from tax charges
  • Discharge from the unauthorised payments surcharge
  • Discharge from the scheme sanction charge
  • Time limits for applying for discharge
  • Case law on applying for discharge
  • More...

Unauthorised payments—tax charges and reporting requirements

There are no limits on the benefits that may be provided by a registered pension scheme. However, under the Finance Act 2004 (FA 2004) if a scheme makes an unauthorised payment:

  1. tax charges will generally arise on both the recipient and the scheme. For further information, see Tax charges on making unauthorised payments, below

  2. ultimately, the scheme may also risk de-registration, which would result in the loss of tax-privileged status for the scheme. For further information, see De-registration and the de-registration charge, below

  3. certain reporting requirements will apply. For further information, see Reporting requirements and penalties, below

Under certain circumstances, HMRC will grant a discharge from certain of the tax charges on unauthorised payments. For further information, see Applying to HMRC for discharge from tax charges, below.

There are also other exceptions to the usual position on unauthorised payments. These are covered in Practice Note: Unauthorised payments: exceptions.

For information on what unauthorised payments are, see Practice Note: Authorised and unauthorised payments.

Tax charges on making unauthorised payments

The tax charges that may apply when an unauthorised payment is made are:

  1. an unauthorised payments charge

  2. an unauthorised payments surcharge, and

  3. a scheme sanction charge

If a scheme makes too many unauthorised payments, it also risks its registration being withdrawn by HMRC.

Unauthorised payments charge and surcharge

Where an unauthorised payment is made, a tax charge of

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