International: UK tax charges on non UK schemes: the member payment charges and taxable property charges: the taxable property unauthorised payments charge
When a registered pension scheme that is an investment-regulated pension scheme invests either directly or indirectly in taxable property, tax charges arise on both the member and the scheme administrator. Members under a relevant non-UK scheme (RNUKS) may also be liable to these taxable property unauthorised payments charges.
Nature of the taxable property unauthorised payments charge
Paragraph 7A Schedule 34 Finance Act 2004
Regulations 4A to 4D The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 - SI 2006/207
A ‘transfer member’ of an RNUKS (see PTM113210 for definitions) that is the equivalent of an investment-regulated pension scheme will be liable to the unauthorised payments charge if their scheme funds are invested in taxable property.
Taxable property is residential property and tangible moveable property. See PTM125100 for guidance on what is an investment-regulated pension scheme and tangible moveable property. PTM125200 provides guidance on the meaning of residential property.
This taxable property unauthorised payments charge arises in the same or similar circumstances in which:
a. a member of a registered pension scheme is liable to a charge by virtue of section 174A and schedule 29A Finance Act 2004 (see PTM125300 and PTM125400) where
- the scheme acquires an interest in taxable property,
- the scheme holds an interest in taxable property which is improved, or
- the scheme holds an interest in property which is converted or adapted to become a residential property.
b. the scheme administrator of a registered pension scheme is liable to the scheme sanction charge on income or gains from taxable property by virtue of section 185A or 185F Finance Act 2004 (see PTM125300 and PTM125400).
c. a member of a registered pension scheme is liable to the scheme sanction charge that would normally arise from income or gains taxable under section 185A or 185F Finance Act 2004 as a consequence of section 273ZA Finance Act 2004.
Regulation 4B provides that where tax arises under sections 185A or 185F Finance Act 2004 due to income and gains from taxable property, the ‘payment’ is an unauthorised payment chargeable on the scheme member (rather than a scheme chargeable payment taxable on the scheme administrator).
Broadly, the regulations apply the taxable property unauthorised payments charge to the extent that a payment is referable to either a transfer member’s taxable asset transfer fund or ring-fenced taxable asset transfer fund (see PTM113230). They also provide for the attribution of payments to particular funds under a relevant non-UK scheme (see PTM113240 to PTM113270).
Where the scheme’s interest in taxable property is not wholly referable to the transfer member’s taxable asset transfer fund or ring-fenced taxable asset transfer fund, the amount of the unauthorised payment is proportionately reduced.
Liability to the taxable property unauthorised payments charge arises wherever the individual is resident. Unlike the member payment charges the tax charge is not ‘turned off’ once
- the individual has been non-resident for more than 10 full tax years, and
- it is more than five years since the last transfer was made to the scheme.
Individuals who are liable to the taxable property unauthorised payments charge will need to declare this on their Self Assessment tax return for the tax year in which the charge arises. If a member has not been issued with a notice to file a tax return they are bound by the normal obligation to notify HMRC of their chargeability to UK tax liability.
An individual can still be liable to taxable property unauthorised payments charge if the RNUKS concerned loses or gives up QROPS status after the transfer was made.