International: UK tax charges on non UK schemes: the member payment charges and taxable property charges: overview of how the regulations attributing payments work from 6 April 2017
Regulations 4ZA to 4ZF The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 - SI 2006/207
Whilst a member has UK funds (that is a UK tax-relieved fund, relevant transfer fund, or ring-fenced transfer fund) under a relevant non-UK scheme (RNUKS), any payment made to or in respect of that member will be referable to the member’s UK funds.
From 6 April 2017, whilst any payment made to or in respect of a member is referable to a member’s UK funds, not every payment will reduce a member’s UK funds. Also from 6 April 2017 a member’s UK funds may be reduced by certain crystallisation events.
The regulations start by setting out which payments and events will reduce a member’s UK funds (regulation 4ZA).
Regulation 4ZB then describes the amount by which a member’s UK funds will be reduced by the payment or event.
Regulation 4ZC sets out the order of attribution. That is which fund or funds a payment will be referable to regardless of whether or not that payment will reduce the member’s UK funds. This regulation also sets how the member’s UK funds will be reduced by a payment or crystallisation event. The order of attribution will depend on the nature of the payment or event.
Regulation 4ZD provides for the depletion (or reduction) of a member’s UK funds to be reversed in certain circumstances. This is because when a member’s UK funds are reduced due to a crystallisation event they in effect are given an upfront deduction before the scheme makes a payment. Regulation 4ZD is designed to ensure the tax rules operate fairly and as intended.
Regulation 4ZE provides for how a member’s UK funds will be increased if HMRC repays an overseas transfer charge to the scheme manager.
Payments of scheme pension or drawdown pension will not reduce a member’s UK funds as the funds should already have been reduced when the pension crystallised. However if the pension crystallised before 6 April 2017 the member’s UK funds will not have been reduced by the crystallisation event. Regulation 4ZF makes provision for the treatment of drawdown pension and scheme pension payments made on or after 6 April 2017 in respect of pre-6 April 2017 crystallisations.
Detailed guidance on each provision can be found as shown below:
|Payments that reduce a member’s UK funds||PTM113250|
|Crystallisation events that reduce a member’s UK funds||PTM113255|
|The order of attribution||PTM113260|
|When a member’s UK funds will be increased||PTM113265|