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Pensions Tax Manual

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International: UK tax charges on non UK schemes: the member payment charges and taxable property charges: definition of UK tax-relieved fund, relevant transfer fund and taxable asset transfer fund

Glossary PTM000001
   

 

Member’s UK tax-relieved fund 
Member’s relevant transfer fund
Taxable asset transfer fund

Member’s UK tax-relieved fund

Paragraph 3 Schedule 34 Finance Act 2004

Regulation 2 The Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 - SI 2006/207

The member payment provisions do not apply to a relieved member of a relevant non-UK scheme (RNUKS) unless the payment is referable to that member’s UK tax-relieved fund under the scheme.

The member’s UK tax-relieved fund under an RNUKS (see PTM113210) is that part of the scheme that represents

  • any UK tax-relieved contributions paid in respect of the member after 5 April 2006 that have received

    • migrant member relief (see PTM111200),
    • transitional corresponding relief (see PTM111500) or
    • relief under a double taxation agreement (see PTM111600), and
  • any provision made under the scheme in relation to the member after 5 April 2006 that is tax exempt by virtue of section 307 Income Tax (Earnings and Pensions) Act 2003.

Investment build-up within the RNUKS on such contributions and provision is not taken into account for the purposes of the member payment charges because it will not have benefited from UK tax relief.

The amount of the member’s UK tax-relieved fund is calculated in accordance with regulation 2 of The Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006. The regulations provide for aggregation of the amounts relating to the member in the scheme which are pension input amounts (see PTM113300):

  • for each tax year (after 5 April 2006) before that in which the calculation falls to be made, and
  • for the period beginning with 6April of the tax year in which the calculation falls to be made and ending immediately before the making of the calculation as if that was a full tax year.

When making this calculation it is necessary to assume that section 229(3) Finance Act 2004 does not apply. This provides that there is no pension input amount for a tax year if, before the end of the tax year, the individual has become entitled to all of their benefits under the scheme or has died.

The UK tax-relieved fund relates to a particular RNUKS so if an individual is a member of two such schemes they will have two separate funds.

Example

Helen received a payment from a RNUKS on 31 December 2014. She came to the UK as a member of the scheme in 2002.

Her pension input amount for 2006-07 and all tax years to 2013-14 was £40,000.

Helen’s pension input amount for 2014-15 is also £40,000, made up of £30,000 for the period from 6 April 2014 to 31 December 2014 and £10,000 from 1 January 2015 to 31 March 2015.

The amount of Helen’s UK tax-relieved fund on 31 December 2014 is therefore £350,000 made up of:

£320,000 for 2006-07 to 2013-14 (£40,000 x 8), plus

£30,000 for the period 6 April 2014 to 31 December 2014

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Member’s relevant transfer fund

Paragraph 4 Schedule 34 Finance Act 2004

Regulation 3 The Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006- SI 2006/207

The member payment provisions do not apply to a transfer member of a relevant non-UK scheme (RNUKS) unless the payment is referable to that member’s relevant transfer fund under the scheme.

The member’s relevant transfer fund under an RNUKS (see PTM113210) is the part of the scheme in respect of a member that represents their relevant transferred sums or assets.

Relevant transferred sums or assets means that any sums or assets transferred directly or indirectly, into a member’s arrangement under the relevant non-UK scheme from:

  • a registered pension scheme or,
  • another relevant non-UK scheme.

Such a transfer must have been made after 5 April 2006 and when the RNUKS was an overseas pension scheme (see PTM112200).

The amount of the member’s relevant transfer fund under an RNUKS is calculated in accordance with Regulation 3 of The Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006. It is the total of the following amounts:

  • the amount crystallised by virtue of BCE 8 (PTM088690 refers) on the transfer from a registered pension scheme to the RNUKS.
  • so much of the Member’s UK tax-relieved fund previously held under any other RNUKS that has been transferred to the scheme but has not been subject to the unauthorised payments charge (see PTM134100); and
  • so much of the member’s relevant transfer fund previously held under any other RNUKS as has been transferred into the current scheme if it was transferred without being subject to the unauthorised payments charge.

There will only be an amount in the relevant transfer fund if the scheme was a qualifying recognised overseas pension scheme (QROPS) when receiving the transfer. If the scheme was not a QROPS, the transfer will not have been a benefit crystallisation event and will have given rise to an unauthorised payments charge.

The amounts to be used in the calculation are the amounts transferred to the scheme.

The relevant transfer fund relates to a particular RNUKS, thus if an individual is a member of two such schemes he/she will have two separate funds.

Example

Gillian transferred £500,000 from a registered pension scheme (scheme A) to a QROPS (scheme B). This is the amount crystallised by virtue of BCE 8. Her relevant transfer fund in scheme B is therefore £500,000.

Gillian then transfers £150,000 from another RNUKS (scheme C) to scheme B. She has received migrant member relief on contributions of £50,000 to scheme C and £100,000 was contributed without UK tax relief whilst she was resident in Japan. So her UK tax-relieved fund under that scheme amounted to £50,000. The transfer was not subject to the unauthorised payments charge.

Her relevant transfer fund in scheme B is therefore increased to £550,000.

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Taxable asset transfer fund

Regulation 3A The Pension Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006- SI 2006/207

A member is liable to the taxable property unauthorised payments charge only to the extent that the payment is referable to that member’s taxable asset transfer fund under the scheme.

The amount of the member’s taxable asset transfer fund under an RNUKS is the total of the following amounts:

  • the amount crystallised by virtue of BCE 8 (PTM088690 refers) on the transfer from a registered pension scheme to the RNUKS
  • so much of the member’s taxable asset transfer fund previously held under any other RNUKS as has been transferred into the current scheme if it was transferred without being subject to the unauthorised payments charge.

The taxable asset transfer fund therefore forms part of the member’s relevant transfer fund under an RNUKS, except where the relevant transfer fund under that scheme consists solely of a UK tax-relieved fund which has been transferred to it.