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HMRC internal manual

Pensions Tax Manual

The scheme administrator: other scheme administrator rights

Glossary PTM000001
   

Right to apply for a lifetime allowance charge to be discharged
Right to apply for a discharge from the scheme sanction charge
Right to claim relief from the scheme sanction charge
Right to apply for an overseas transfer charge to be discharged
Right to apply for a repayment of the overseas transfer charge
Right to apply for a discharge from joint and several liability to the annual allowance charge
Right to apply for a release from liabilities on ceasing to be the scheme administrator
Agreement of Relevant Valuation Factor

Right to apply for a lifetime allowance charge to be discharged

Section 267 Finance Act 2004

The Registered Pension Schemes (Discharge of Liabilities under Sections 267 and 268 of the Finance Act 2004) Regulations 2005 - SI 2005/3452

One of the tax charges that a scheme administrator is liable for under Part 4 of Finance Act 2004 is the lifetime allowance charge. Usually, this liability is a joint and several liability with the scheme member.

A scheme administrator can apply in writing to HMRC to have all or part of their liability to the lifetime allowance charge discharged if

  • the scheme administrator reasonably believed all or part of that liability was not actually due, and
  • as a result, it would not be just and reasonable for all or part of that liability to be a liability of the scheme administrator.

If the scheme administrator is liable to lifetime allowance charges in respect of more than one benefit crystallisation event then a separate application to be discharged must be made in respect of each BCE.

On receiving an application from the scheme administrator, HMRC must:

  • decide whether or not to discharge the scheme administrator’s liability to the lifetime allowance charge, or to the excess amount in the case of an application for a partial discharge, and
  • notify the scheme administrator of their decision.

Section 269 Finance Act 2004

If HMRC decide not to discharge the scheme administrator’ liability to the lifetime allowance charge, either in whole or in part, the scheme administrator may appeal against the decision.

Grounds for applying for a lifetime allowance charge discharge

Any application for all or part of a lifetime allowance charge to be discharged must set out the particulars of the ground relied on in that discharge application.

The only grounds on which HMRC will consider a discharge of a lifetime allowance liability in response to an application by the scheme administrator is that:

  • in the case of an application to be discharged from the full amount of the lifetime allowance charge, the scheme administrator reasonably believed that there was no liability to the lifetime allowance charge in respect of the BCE, or
  • in the case of an application to be discharged from part of the lifetime allowance charge - the excess amount - that the scheme administrator reasonably believed that the amount of the lifetime allowance charge in respect of the BCE was less than the actual amount, and
  • in all the circumstances of the case, it would not be just and reasonable for the scheme administrator to be liable in respect of the BCE to the lifetime allowance charge, or, in the event of an application for a partial discharge, the excess amount.

Time limit for making an application for a lifetime allowance charge discharge

The time limit for making an application for a discharge from all or part of a lifetime allowance charge on the scheme administrator is:

  • where there has been an assessment made under section 36 Taxes Management Act 1970 (sometimes known as a ‘discovery assessment’), within two years of the date on which the assessment was made
  • where there has been no discovery assessment and the scheme administrator is a company, no later than 6 years after the end of the accounting period to which the application relates
  • where there has been no discovery assessment and the scheme administrator is not a company, no later than five years after 31st January next following the year of assessment to which the application relates.

Errors or mistakes in the application for a lifetime allowance charge discharge

If the applicant subsequently discovers that an application for a lifetime allowance charge discharge contains an error or a mistake then they may make a supplementary application in the same manner and within the same time limit as was allowed when they made the original application.

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Right to apply for a discharge from the scheme sanction charge

Section 268 Finance Act 2004

The Registered Pension Schemes (Discharge of Liabilities under Sections 267 and 268 of the Finance Act 2004) Regulations 2005 - SI 2005/3452

In certain circumstances the scheme administrator may be discharged from liability to the scheme sanction charge. PTM135400 provides guidance on when and how a scheme administrator can make such an application.

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Right to claim relief from the scheme sanction charge

Section 266B Finance Act 2004

In certain circumstances the scheme administrator can claim relief from part of the scheme sanction charge. PTM135300 (under the section headed ‘Relief from liability to the scheme sanction charge’) sets out when and how a scheme administrator can make such a claim.

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Right to apply for an overseas transfer charge to be discharged

Section 244N Finance Act 2004

The scheme administrator may be liable to the overseas transfer charge when a transfer is made to a qualifying recognised overseas pension scheme.  Liability to the overseas transfer charge that occurs on a transfer from a registered pension scheme is joint and several with the scheme member. 

In certain circumstances the scheme administrator may be discharged from liability to the overseas transfer charge. PTM102700 provides guidance on when and how a scheme administrator can make such an application.

Right to apply for a repayment of the overseas transfer charge

Section 244M Finance Act 2004

If a transfer from a registered pension scheme was subject to the overseas transfer charge, that tax charge may become repayable in certain circumstances.  A scheme administrator can then reclaim the overseas transfer charge that they paid.  PTM102600 provides more information on when the overseas transfer charge may be repaid.

Right to apply for a discharge from joint and several liability to the annual allowance charge

Section 237D Finance Act 2004

Normally only the member is liable to the annual allowance charge. However if the member chooses to use the ‘scheme pays’ option the scheme administrator will become jointly and severally liable to the amount of the tax charge covered by ‘scheme pay’ - see PTM056410.

In certain circumstances the scheme administrator can apply to be discharged from this joint and several liability to the annual allowance charge. PTM056470 provides guidance on when a scheme administrator can make such an application.

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Right to apply for a release from liabilities on ceasing to be the scheme administrator

Section 271 Finance Act 2004

Sections 42 and 43 and Schedule 1A Taxes Management Act 1970

PTM154000 explains that a scheme administrator that has resigned may retain liability where there is no replacement scheme administrator. Anyone who has retained liabilities after ceasing to be the scheme administrator may apply to be released from those liabilities. The application must be made in writing to HMRC and must:

  • show the income tax to which the person who was appointed as the scheme administrator is liable,
  • include such particulars of the events or other circumstances giving rise to the liability (including particulars as to the persons to whom the events or other circumstances relate) as would have been required to be included in returns under section 254 Finance Act 2004 if the person who was appointed as the scheme administrator had continued as the scheme administrator, and
  • contain a declaration to the effect that all of the particulars given are correctly stated to the best of the information and belief of the applicant.

On receiving an application, HMRC must decide whether or not to discharge the former scheme administrator from their retained liabilities and notify that person of their decision.

If HMRC’s decision is not to discharge the former scheme administrator of their retained liabilities the former scheme administrator may appeal against the decision. Such an appeal must be made in writing to HMRC within 30 days of the notification of HMRC’s decision.

Time limit for making an application

The time limit to make an application for release from scheme administrator liabilities is:

  • where there has been an assessment made under section 36 Taxes Management Act 1970 (sometimes known as a ‘discovery assessment’), within two years of the date on which the assessment was made
  • where there has been no discovery assessment and the person is a company, no later than four years after the end of the accounting period to which the application relates
  • where there has been no discovery assessment and the person is not a company, no later than four years after the end of the year of assessment to which the application relates.

Errors or mistakes in the discharge

If the applicant subsequently discovers that an application for release from tax-related liabilities contains an error or a mistake then they may make a supplementary application in the same manner and within the same time limit as was allowed when they made the original application.

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Agreement of Relevant Valuation Factor

Section 276 Finance Act 2004

The scheme administrator can agree with HMRC to a relevant valuation factor (RVF) of more than 20 in relation to their registered pension scheme. The relevant valuation fact or is the factor used to determine the amount crystallised in respect of a scheme pension under benefit crystallisation events 2, 3 and 5.