Finance Bill

House of Commons

Session 2003 - 04
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Finance Bill

Finance Bill
Part 4 — Pension schemes etc
Chapter 1 — Introduction
131

142
Meaning of “arrangement”
(1)
In this Part “arrangement”, in relation to a member of a pension scheme, means
an arrangement relating to the member under the pension scheme.
(2)
For the purposes of this Part an arrangement is a “money purchase
arrangement” at any time if, at that time, all the benefits that may be provided
5
to or in respect of the member under the arrangement are cash balance benefits
or other money purchase benefits.
(3)
For the purposes of this Part a money purchase arrangement is a “cash balance
arrangement” at any time if, at that time, all the benefits that may be provided
to or in respect of the member under the arrangement are cash balance benefits.
10
(4)
In this Part “money purchase benefits”, in relation to a member of a pension
scheme, means benefits the rate or amount of which is calculated by reference
to an amount available for the provision of benefits to or in respect of the
member (whether the amount so available is calculated by reference to
payments made under the pension scheme by the member or any other person
15
in respect of the member or any other factor).
(5)
In this Part “cash balance benefits” means benefits the rate or amount of which
is calculated by reference to an amount available for the provision of benefits
to or in respect of the member calculated otherwise than wholly by reference
to payments made under the arrangement by the member or by any other
20
person in respect of the member (or transfers or other credits).
(6)
For the purposes of this Part an arrangement is a “defined benefits
arrangement” at any time if, at that time, all the benefits that may be provided
to or in respect of the member under the arrangement are defined benefits.
(7)
In this Part “defined benefits”, in relation to a member of a pension scheme,
25
means benefits which are not money purchase benefits (but which are
calculated by reference to earnings or service of the member or any other factor
other than an amount available for their provision).
(8)
For the purposes of this Part an arrangement is a “hybrid arrangement” at any
time if, at that time, all of the benefits that may be provided to or in respect of
30
the member under the arrangement are, depending on the circumstances, to be
of one of any two or three of the following varieties—
(a)
cash balance benefits,
(b)
other money purchase benefits, and
(c)
defined benefits.
35
(9)
Where not all of the benefits that may be provided under an arrangement to or
in respect of the member are of the same one of those varieties of benefits, the
arrangement is to be treated for the purposes of this Part as being two or three
separate arrangements one of which relates to each of the two or three varieties
of benefits that may be so provided.
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Finance Bill
Part 4 — Pension schemes etc
Chapter 2 — Registration of pension schemes
132

Chapter 2
Registration of pension schemes
Registration
143
Registration of pension schemes
(1)
An application may be made to the Inland Revenue for a pension scheme to be
5
registered.
(2)
The application—
(a)
must contain any information which is reasonably required by the
Inland Revenue in any form specified by the Board of Inland Revenue,
and
10
(b)
must be accompanied by a declaration that the application is made by
the scheme administrator (see section 257) and any other declarations
by the scheme administrator which are reasonably required by the
Inland Revenue.
(3)
The declarations which the Inland Revenue may require to accompany an
15
application for the registration of a pension scheme include, in particular, a
declaration that the instruments or agreements by which it is constituted do
not entitle any person to unauthorised payments (see section 150(5)).
(4)
On receipt of an application for a pension scheme to be registered the Inland
Revenue must decide whether or not to register the pension scheme.
20
(5)
The Inland Revenue’s decision must be to register the pension scheme unless
it appears that—
(a)
any information contained in the application is incorrect, or
(b)
any declaration accompanying it is false.
(6)
The Inland Revenue must notify the scheme administrator of the decision on
25
the application.
(7)
Unless the Inland Revenue’s decision is not to register the pension scheme, the
notification must state the day on and after which the pension scheme will be
a registered pension scheme.
(8)
An annuity contract—
30
(a)
by means of which benefits under a registered pension scheme have
been secured, but
(b)
which does not provide for the immediate payment of benefits,

is to be treated as having become a registered pension scheme on the day on
which it is made.
35
(9)
Schedule 34 contains (in Part 1) provisions treating certain pension schemes in
existence immediately before 6th April 2006 as registered pension schemes
(and related provisions).
144
Persons by whom registered pension scheme may be established
(1)
An application to register a pension scheme may be made only if the pension
40
scheme is an occupational pension scheme or has been established by—
(a)
an insurance company (see section 262),

Finance Bill
Part 4 — Pension schemes etc
Chapter 2 — Registration of pension schemes
133

(b)
a unit trust scheme manager,
(c)
an operator, trustee or depositary of a recognised EEA collective
investment scheme,
(d)
an authorised open-ended investment company,
(e)
a building society,
5
(f)
a bank, or
(g)
an EEA investment portfolio manager.
(2)
But subsection (1) does not apply to a public service pension scheme.
(3)
Section 145 defines terms used in subsection (1)(b) to (g).
(4)
The Treasury may by order amend this section and section 145.
10
145
Persons by whom scheme may be established: supplementary
(1)
This section has effect for defining terms used in section 144(1)(b) to (g).
(2)
“Unit trust scheme manager” means—
(a)
a person who has permission under Part 4 of FISMA 2000 to manage
unit trust schemes authorised under section 243 of FISMA 2000, or
15
(b)
a firm which has permission under paragraph 4 of Schedule 4 to FISMA
2000 (as a result of qualifying for authorisation under paragraph 2 of
that Schedule: Treaty firms) to manage unit trust schemes authorised
under that section.
(3)
“Recognised EEA collective investment scheme” means a collective investment
20
scheme (within the meaning given by section 235 of FISMA 2000) which is
recognised by virtue of section 264 of FISMA 2000 (schemes constituted in
other EEA States).
(4)
“Authorised open-ended investment company” has the meaning given by
section 237(3) of FISMA 2000.
25
(5)
“Building society” means a building society within the Building Societies Act
1986 (c. 53).
(6)
“Bank” means—
(a)
a person falling within section 840A(1)(b) of ICTA (persons, other than
building societies etc. permitted to accept deposits), or
30
(b)
a body corporate which is a subsidiary or holding company of a person
falling within section 840A(1)(b) of ICTA or is a subsidiary of the
holding company of such a person.

In paragraph (b) “subsidiary” and “holding company” are to be read in
accordance with section 736 of the Companies Act 1985 (c. 6) or Article 4 of the
35
Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)).
(7)
“EEA investment portfolio manager” means an institution which—
(a)
is an EEA firm of the kind mentioned in paragraph 5(a), (b) or (c) of
Schedule 3 to FISMA 2000 (certain credit and financial institutions and
direct insurance undertakings),
40
(b)
qualifies for authorisation under paragraph 12(1) or (2) of that
Schedule, and
(c)
has permission under FISMA 2000 to manage portfolios of investments.

Finance Bill
Part 4 — Pension schemes etc
Chapter 2 — Registration of pension schemes
134

146
Appeal against decision not to register
(1)
This section applies where, on an application for a pension scheme to be
registered, the Inland Revenue’s decision is not to register the pension scheme.
(2)
The scheme administrator may appeal against the decision.
(3)
The appeal is to the General Commissioners, except that the scheme
5
administrator may elect (in accordance with section 46(1) of TMA 1970) to
bring the appeal before the Special Commissioners instead of the General
Commissioners.
(4)
Paragraphs 1, 2, 8 and 9 of Schedule 3 to TMA 1970 (rules for assigning
proceedings to General Commissioners) have effect to identify the General
10
Commissioners before whom an appeal under this section is to be brought, but
subject to modifications specified in an order made by the Board of Inland
Revenue.
(5)
An appeal under this section against a decision must be brought within the
period of 30 days beginning with the day on which the scheme administrator
15
was notified of the decision.
(6)
The Commissioners before whom an appeal under this section is brought must
consider whether the pension scheme ought to have been registered by the
Inland Revenue.
(7)
If they decide that the pension scheme ought not to have been registered by the
20
Inland Revenue, they must dismiss the appeal.
(8)
If they decide that the pension scheme ought to have been registered by the
Inland Revenue, the pension scheme is to be treated as having been registered
on such date as the Commissioners determine (but subject to any further
appeal or any determination on, or in consequence of, a case stated).
25
De-registration
147
De-registration
(1)
The Inland Revenue may withdraw the registration of a pension scheme.
(2)
If the Inland Revenue withdraws the registration of a pension scheme the
Inland Revenue must notify the scheme administrator.
30
(3)
If there is no-one who is the scheme administrator, the Inland Revenue must
instead notify any person or persons—
(a)
who has or have responsibility for the discharge of any obligation
relating to the pension scheme under section 258(4) (continuation of
liability where no scheme administrator), section 259 (trustees etc.) or
35
section 260 (members), and
(b)
whom it is reasonably practicable for the Inland Revenue to identify.
(4)
The notification must state the date on and after which the pension scheme will
not be a registered pension scheme.
148
Grounds for de-registration
40
(1)
The registration of a pension scheme may be withdrawn under section 147 only
if it appears to the Inland Revenue—

Finance Bill
Part 4 — Pension schemes etc
Chapter 2 — Registration of pension schemes
135

(a)
that the amount of the scheme chargeable payments (see section 230)
made by the pension scheme during any period of 12 months exceeds
the de-registration threshold,
(b)
that the scheme administrator fails to pay a substantial amount of tax
(or interest on tax) due from the scheme administrator by virtue of this
5
Part,
(c)
that the scheme administrator fails to provide information required to
be provided to the Inland Revenue by virtue of this Part and the failure
is significant,
(d)
that any information contained in the application to register the
10
pension scheme or otherwise provided to the Inland Revenue is
incorrect in a material particular,
(e)
that any declaration accompanying that application or the provision of
other information to the Inland Revenue is false in a material particular,
or
15
(f)
that there is no scheme administrator.
(2)
The amount of the scheme chargeable payments made by a pension scheme
during any period of 12 months exceeds the de-registration threshold if the
scheme chargeable payments percentage is 25% or more.
(3)
The scheme chargeable payments percentage is—
20
(a)
if only one scheme chargeable payment is made during the period of 12
months, the percentage of the pension fund used up on the occasion of
that scheme chargeable payment, and
(b)
if two or more scheme chargeable payments are made during the
period of 12 months, the aggregate of the percentages of the pension
25
fund used up on the occasion of each of those scheme chargeable
payments.
(4)
The percentage of the pension fund used up on the occasion of a scheme
chargeable payment is—
where—
30
SCP is the amount of the scheme chargeable payment, and
AA is an amount equal to the aggregate of the amount of the sums and
the market value of the assets held for the purposes of the pension
scheme at the time when the scheme chargeable payment is made.
(5)
A failure by a scheme administrator to provide information required to be
35
provided to the Inland Revenue by or under this Part is significant if—
(a)
the amount of information which the scheme administrator fails to
provide is substantial, or
(b)
the failure to provide the information is likely to result in serious
prejudice to the assessment or collection of tax.
40
149
Appeal against decision to de-register
(1)
This section applies where the Inland Revenue decides to withdraw the
registration of a pension scheme under section 147.
(2)
The scheme administrator, or any person notified under that section of the
withdrawal of registration, may appeal against the decision.
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Finance Bill
Part 4 — Pension schemes etc
Chapter 3 — Payments by registered pension schemes
136

(3)
The appeal is to the General Commissioners, except that the appellant may
elect (in accordance with section 46(1) of TMA 1970) to bring the appeal before
the Special Commissioners instead of the General Commissioners.
(4)
Paragraphs 1, 2, 8 and 9 of Schedule 3 to TMA 1970 (rules for assigning
proceedings to General Commissioners) have effect to identify the General
5
Commissioners before whom an appeal under this section is to be brought, but
subject to modifications specified in an order made by the Board of Inland
Revenue.
(5)
An appeal under this section against a decision must be brought within the
period of 30 days beginning with the day on which the appellant was notified
10
of the decision.
(6)
The Commissioners before whom an appeal under this section is brought must
consider whether the registration of the pension scheme ought to have been
withdrawn.
(7)
If they decide that the registration of the pension scheme ought to have been
15
withdrawn, they must dismiss the appeal.
(8)
If they decide that the registration of the pension scheme ought not to have
been withdrawn, the pension scheme is to be treated as having remained a
registered pension scheme (but subject to any further appeal or any
determination on, or in consequence of, a case stated).
20
Chapter 3
Payments by registered pension schemes
Introductory
150
Payments by registered pension schemes
(1)
The only payments which a registered pension scheme is authorised to make
25
to or in respect of a member of the pension scheme are those specified in
section 154.
(2)
In this Part “unauthorised member payment” means—
(a)
a payment by a registered pension scheme to or in respect of a member
of the pension scheme which is not authorised by section 154, and
30
(b)
anything which is to be treated as an unauthorised payment to a
member of the pension scheme under section 161, 162 or 163.
(3)
The only payments which a registered pension scheme that is an occupational
pension scheme is authorised to make to or in respect of a sponsoring employer
are those specified in section 164.
35
(4)
In this Part “unauthorised employer payment” means—
(a)
a payment by a registered pension scheme that is an occupational
pension scheme, to or in respect of a sponsoring employer, which is not
authorised by section 164, and
(b)
anything which is to be treated as an unauthorised payment to a
40
sponsoring employer under section 170.
(5)
In this Part “unauthorised payment” means—

Finance Bill
Part 4 — Pension schemes etc
Chapter 3 — Payments by registered pension schemes
137

(a)
an unauthorised member payment, or
(b)
an unauthorised employer payment.
(6)
As well as section 147 (de-registration), the following provisions—
(a)
section 197 (unauthorised payments charge),
(b)
section 198 (unauthorised payments surcharge),
5
(c)
section 228 (scheme sanction charge), and
(d)
section 231 (de-registration charge),

specify consequences of making unauthorised payments.
(7)
Sections 171 to 174 contain provision about amounts that a registered pension
scheme is not authorised to borrow.
10
(8)
As well as section 147, sections 228 and 231 specify consequences of
unauthorised borrowing.
(9)
Schedule 34 contains (in Parts 3 and 4) transitional provision about
unauthorised payments.
151
Meaning of “payment” etc
15
(1)
This section applies for the interpretation of this Chapter.
(2)
“Payment” includes a transfer of assets and any other transfer of money’s
worth.
(3)
Subsection (4) applies to a payment made or benefit provided under or in
connection with an investment (including an insurance contract or annuity)
20
acquired using sums or assets held for the purposes of a registered pension
scheme.
(4)
The payment or benefit is to be treated as made or provided from sums or
assets held for the purposes of the pension scheme, even if the pension scheme
has been wound up since the investment was acquired.
25
(5)
A payment made by a registered pension scheme to a person who—
(a)
is connected with a member or sponsoring employer (or was connected
with a member at the date of the member’s death), and
(b)
is not a member or sponsoring employer,

is to be treated as made in respect of the member or sponsoring employer.
30
(6)
Any asset held by a person connected with a member or sponsoring employer
is to be treated as held for the benefit of the member or sponsoring employer.
(7)
Any increase in the value of an asset held by, or reduction in the liability of, a
person connected with a member or sponsoring employer is to be treated as an
increase or reduction for the benefit of the member or sponsoring employer.
35
(8)
Section 839 of ICTA (connected persons) applies for the purposes of this
section.
152
Meaning of “loan”
(1)
This section applies for the interpretation of this Chapter.