Unauthorised payments: the unauthorised payments charge and the unauthorised payments surcharge: reporting and paying the charges
Regulations 3 and 4 The Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567
The scheme administrator should report the details of any payment of an unauthorised payment on the Event Report.
Responsibility of the liable person
The person liable to the unauthorised payments charge and unauthorised payments surcharge can either:
- if they are a scheme member, ask the scheme to pay the tax using the mandating procedure, or
- declare the payment on their Self Assessment return. Where a person does not receive a Self Assessment return (and does not use the mandating procedure) they must report their chargeability to tax in respect of the payment to H M Revenue & Customs (HMRC).
The mandating procedure
Schemes don’t have to offer the mandating procedure to their members. If they do, the member completes a mandate giving the scheme administrator the authority to deduct tax from the member’s unauthorised payment and pay the tax to HMRC. The details are recorded on an event report that the administrator sends to HMRC annually - PTM161100
If the member doesn’t sign the mandate or the scheme doesn’t use the mandating procedure the member must report and pay the tax using Self Assessment.
The advantage to the scheme of using the mandating procedure is that the scheme administrator will know how much scheme sanction charge they will have to pay.
The unauthorised payment should be reported in the return for the year in which it is made (unless the mandating procedure is being used). The due date for payment will relate to that year. The normal interest and penalty rules for Income Tax apply. Refer to the Compliance Handbook (external users please go to http://www.hmrc.gov.uk/manuals/chmanual/index.htm).
Liable employers who are companies
Regulation 5 The Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567
Regulation 5 The Registered Pension Schemes and Overseas pension schemes (Electronic Communication of Returns and Information) Regulations 2006 - SI 2006/570
Where a registered pension scheme makes an unauthorised employer payment to a company, that company is required to provide HMRC with the information detailed at PTM160500 no later than 31 January following the tax year of payment.
The company must provide this information to the HMRC office dealing with the tax affairs of the employer in respect of whom the unauthorised employer payment was made. The reports should not be sent to HMRC Pension Schemes Services.
This information may be provided by electronic means.