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HMRC internal manual

Pensions Tax Manual

Transfers: transfers to a QROPS: discharge from liability to the overseas transfer charge

Glossary PTM000001
   

Section 244N Finance Act 2004

Where

  • a transfer is subject to the overseas transfer charge and
  • the scheme administrator or scheme manager did not deduct and pay the tax to HMRC because they thought the transfer was not taxable

they may apply to HMRC for a discharge from liability to the tax charge. 

The member cannot be discharged from their liability to the overseas transfer charge; there is no provision for this in the legislation.

The grounds for this application to be discharged from liability are that:

  • the scheme administrator or scheme manager reasonably believed that there was no liability to the tax charge
  • in all the circumstances of the case, it would not be just and reasonable for them to be liable to the charge

This ‘good faith’ protection is aimed at where the situation has arisen due to circumstances outside the control of the scheme administrator or scheme manager.  For example, the scheme administrator or scheme manager has been misled, or has been given incomplete information, by the member or another party acting for them, leading them to assume wrongly that the tax charge was not due. Where the information provided by the member or their agents isn’t clear, or conflicts with other available information, HMRC expects scheme administrators or managers to ask appropriate questions to clarify the situation.

Scheme administrators and scheme managers should retain documentary evidence of any statement, or information, that they have relied on.

The application for discharge of liability to the overseas transfer charge must be made in writing and set out the particulars of the grounds for the discharge of liability.

HMRC will be specifying the time limits for these applications by further regulations.  Until such time as these are publicised scheme administrators and managers should submit their application to HMRC as soon as possible after becoming aware of the need to make such an application.

Scheme administrators that have not yet reported the chargeable transfer on the Accounting for Tax return (AFT) must include the information about the transfer that should be provided on the AFT (see PTM162200) with the discharge application.

Similarly if a scheme manager has not yet reported the transfer to HMRC in accordance with PTM112700, they should provide that information as part of their application for discharge.

On receipt of the discharge application HMRC will consider the available evidence. HMRC will not discharge scheme administrators or scheme managers from their liability if they have not taken due care to establish if a transfer is subject to the overseas transfer charge.

If HMRC discharges the scheme administrator (or scheme manager as appropriate) from liability to the overseas transfer charge they will notify them of their decision. The member will still remain liable to the overseas transfer charge.

If HMRC refuses the application to discharge the scheme administrator’s (or scheme manager’s) liability to the overseas transfer charge, HMRC will notify them of their decision.  The scheme administrator (or scheme manager) can appeal against this decision.  The appeal should be made to HMRC in writing within 30 days of the date that HMRC gave the notification of their decision.

Under the appeal and review process either HMRC or, if necessary, a tribunal may decide whether or not the decision was correct.