Pensions: a treatment of alternatively secured pensions from 6 April 2007: example where UP charge paid first
The scheme member dies and leaves an estate of £270,000. The IHT NRB is £300,000 and the value of the funds in their ASP is £200,000. The funds in the ASP have been paid out before the IHT is due and will attract a UP charge of 70%. In reality though, the scheme administrator will want to ensure they have retained sufficient funds to meet the Inheritance Tax due.
Because the funds have been charged Income Tax at 70%, we charge IHT on the balance of the funds (£200,000 - £140,000 = £60,000) in a normal top-slice calculation.
On COMPASS you will need to:
- add a new entry to the case record,
- select the ‘stats’ title ‘ASP fund chargeable from 6 April 2007’
- include the net value of the ASP at £60,000
- include the value of the remainder of the estate in the ‘Aggregate chargeable estate’ box
This will give rise to a charge on the ASP funds of (£270,000 + £60,000 - £300,000) × 40% = £12,000.