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205 | Unauthorised payments surcharge |
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(1) | A charge to income tax, to be known as the unauthorised payments surcharge, |
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arises where a surchargeable unauthorised payment is made by a registered |
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(2) | “Surchargeable unauthorised payments” means— |
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(a) | surchargeable unauthorised member payments (see section 206), and |
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(b) | surchargeable unauthorised employer payments (see section 209). |
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(3) | The person liable to the charge— |
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(a) | in the case of a surchargeable unauthorised member payment made |
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before the member’s death, is the member in respect of whose |
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arrangement the payment was made, |
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(b) | in the case of a surchargeable unauthorised member payment made |
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after the member’s death, is the recipient, and |
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(c) | in the case of a surchargeable unauthorised employer payment, is the |
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sponsoring employer to or in respect of whom the payment was made. |
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(4) | If more than one person is liable to the unauthorised payments surcharge in |
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respect of a surchargeable unauthorised payment, those persons are jointly |
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and severally liable to the surcharge in respect of the payment. |
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(5) | A person is liable to the unauthorised payments surcharge whether or not— |
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(b) | any other person who is liable to the unauthorised payments |
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(c) | the scheme administrator, |
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| are resident, ordinarily resident or domiciled in the United Kingdom. |
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(6) | The rate of the charge is 15% in respect of the surchargeable unauthorised |
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(7) | The Treasury may by order increase or decrease the rate for the time being |
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specified in subsection (6). |
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206 | Surchargeable unauthorised member payments |
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(1) | This section identifies which unauthorised member payments made by a |
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registered pension scheme in respect of an arrangement relating to a member |
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under the pension scheme are surchargeable. |
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(2) | If the surcharge threshold is reached before the end of the period of 12 months |
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beginning with a reference date, each unauthorised member payment made in |
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respect of the arrangement in the surcharge period is surchargeable. |
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(3) | The surcharge period is the period— |
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(a) | beginning with the reference date, and |
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(b) | ending with the day on which the surcharge threshold is reached. |
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(4) | The first reference date is the date on which the pension scheme first makes an |
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unauthorised member payment in respect of the arrangement. |
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(5) | Each subsequent reference date is the date, after the end of the previous |
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reference period, on which the pension scheme next makes an unauthorised |
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member payment in respect of the arrangement. |
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(6) | The previous reference period is the period of 12 months beginning with the |
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previous reference date or, if the surcharge threshold is reached in that period, |
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is the surcharge period ending with the date on which it was reached. |
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(7) | The surcharge threshold is reached if the unauthorised payments percentage |
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(8) | The unauthorised payments percentage is the aggregate of the percentages of |
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the pension fund used up by each unauthorised member payment made by the |
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pension scheme in respect of the arrangement on or after the reference date. |
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(9) | The percentage of the pension fund used up on the occasion of an unauthorised |
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member payment is—![equation: cross[over[times[char[U],char[M],char[P]],times[char[V],char[R]]],num[100.00000000,
"100"]]](missing.gif) |
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| UMP is the amount of the unauthorised member payment, and |
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| VR is an amount equal to the value of the member’s rights under the |
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arrangement when the unauthorised payment is made (or, if the |
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unauthorised payment is made after the member’s death, at the date of |
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(10) | The value of the member’s rights under the arrangement on that date is the |
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(a) | the value of the member’s crystallised rights under the arrangement on |
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that date, calculated in accordance with section 207, and |
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(b) | the value of the member’s uncrystallised rights under the arrangement |
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on that date, calculated in accordance with section 208. |
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207 | Valuation of crystallised rights for purposes of section 206 |
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(1) | The value of the member’s crystallised rights under the arrangement on any |
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date is the aggregate of— |
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(a) | the value of each scheme pension or lifetime annuity to which the |
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member has an actual (rather than a prospective) entitlement under the |
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arrangement on that date, and |
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(b) | the aggregate of the amount of the sums, and the market value of the |
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assets, representing the member’s unsecured pension fund or |
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alternatively secured pension fund in respect of the arrangement on |
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(2) | The value of a scheme pension or lifetime annuity is—![equation: cross[times[char[R],char[V],char[F]],times[char[A],char[R],char[P]]]](missing.gif) |
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| RVF is the relevant valuation factor (see section 270), and |
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| ARP is an amount equal to the annual rate of the pension or annuity on |
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208 | Valuation of uncrystallised rights for purposes of section 206 |
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(1) | Rights are uncrystallised if the member is not entitled to the present payment |
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of benefits in respect of the rights. |
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(2) | The member is to be treated as entitled to the present payment of benefits in |
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respect of the sums and assets representing the member’s unsecured pension |
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fund or alternatively secured pension fund. |
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(3) | The value of the member’s uncrystallised rights under the arrangement on any |
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date is to be calculated— |
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(a) | in accordance with subsection (4) if the arrangement is a cash balance |
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(b) | in accordance with subsection (5) if the arrangement is a money |
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purchase arrangement other than a cash balance arrangement, |
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(c) | in accordance with subsection (6) if the arrangement is a defined |
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benefits arrangement, and |
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(d) | in accordance with subsection (7) if the arrangement is a hybrid |
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(4) | If this subsection applies, the value of the member’s uncrystallised rights |
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under the arrangement on the date is the amount which would, on the |
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valuation assumptions (see section 271), be available for the provision of |
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benefits in respect of those rights if the member became entitled to benefits in |
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respect of those rights on the date. |
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(5) | If this subsection applies, the value of the member’s uncrystallised rights |
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under the arrangement on the date is the aggregate of— |
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(a) | the amount of such of the sums held for the purposes of the |
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arrangement on the date as represent those rights, and |
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(b) | the market value of such of the assets held for the purposes of the |
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arrangement on the date as represent those rights. |
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(6) | If this subsection applies, the value of the member’s uncrystallised rights |
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under the arrangement on the date is—![equation: plus[id[cross[times[char[R],char[V],char[F]],times[char[A],char[R],char[P]]]],times[
char[L],char[S]]]](missing.gif) |
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| RVF is the relevant valuation factor (see section 270), |
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| ARP is the annual rate of pension to which the member would, on the |
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valuation assumptions, be entitled under the arrangement on the date |
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if, on the date, the member acquired an actual (rather than a |
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prospective) right to receive a pension in respect of the rights, and |
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| LS is the amount of any lump sum to which the member would, on the |
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valuation assumptions, be entitled under the arrangement on the date |
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(otherwise than by way of commutation of pension) if, on the date, the |
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member acquired an actual (rather than a prospective) right to payment |
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of a lump sum in respect of the rights. |
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(7) | If this subsection applies, the value of the member’s uncrystallised rights |
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under the arrangement on the date is— |
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(a) | if each of subsections (4), (5) and (6) is relevant, the greatest of the |
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values of the rights calculated in accordance with each of those |
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(b) | if only two of those subsections are relevant, the greater of the values of |
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the rights calculated in accordance with each of the two subsections. |
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(8) | Subsection (4) is relevant if, in any circumstances, cash balance benefits may be |
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provided to or in respect of the member under the arrangement. |
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(9) | Subsection (5) is relevant if, in any circumstances, money purchase benefits |
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other than cash balance benefits may be provided to or in respect of the |
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member under the arrangement. |
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(10) | Subsection (6) is relevant if, in any circumstances, defined benefits may be |
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provided to or in respect of the member under the arrangement. |
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209 | Surchargeable unauthorised employer payments |
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(1) | This section identifies which unauthorised employer payments made by a |
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registered pension scheme to or in respect of a sponsoring employer are |
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(2) | If the surcharge threshold is reached before the end of the period of 12 months |
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beginning with a reference date, each unauthorised employer payment made |
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to or in respect of the employer in the surcharge period is surchargeable. |
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(3) | The surcharge period is the period— |
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(a) | beginning with the reference date, and |
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(b) | ending with the day on which the surcharge threshold is reached. |
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(4) | The first reference date is the date on which the pension scheme first makes an |
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unauthorised employer payment to or in respect of the employer. |
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(5) | Each subsequent reference date is the date, after the end of the previous |
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reference period, on which the pension scheme next makes an unauthorised |
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employer payment to or in respect of the employer. |
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(6) | The previous reference period is the period of 12 months beginning with the |
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previous reference date or, if the surcharge threshold is reached in that period, |
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is the surcharge period ending with the date on which it was reached. |
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(7) | The surcharge threshold is reached if the unauthorised payments percentage |
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(8) | The unauthorised payments percentage is the aggregate of the percentages of |
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the pension fund used up by each unauthorised employer payment made by |
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the pension scheme to or in respect of the employer on or after the reference |
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(9) | The percentage of the pension fund used up on the occasion of an unauthorised |
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employer payment is—![equation: cross[over[times[char[U],char[E],char[P]],times[char[A],char[A]]],num[100.00000000,
"100"]]](missing.gif) |
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| UEP is the amount of the unauthorised employer payment, and |
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| AA is an amount equal to the aggregate of the amount of the sums and the |
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market value of the assets held for the purposes of the pension scheme |
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at the time when the unauthorised employer payment is made. |
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Lifetime allowance charge |
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210 | Lifetime allowance charge |
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(1) | A charge to income tax, to be known as the lifetime allowance charge, arises |
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(a) | a benefit crystallisation event occurs in relation to an individual who is |
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a member of one or more registered pension schemes, and |
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(b) | either the first lifetime allowance charge condition or the second |
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lifetime allowance charge condition is met. |
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(2) | The first lifetime allowance charge condition is that— |
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(a) | the whole or any part of the individual’s lifetime allowance is available |
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on the benefit crystallisation event, but |
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(b) | the amount crystallised by the benefit crystallisation event exceeds the |
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amount of the individual’s lifetime allowance which is available on the |
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benefit crystallisation event. |
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(3) | The second lifetime allowance charge condition is that none of the individual’s |
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lifetime allowance is available on the benefit crystallisation event. |
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(4) | The following sections make further provision about the lifetime allowance |
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| section 211 (amount of charge), |
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| section 212 and Schedule 32 (benefit crystallisation events and amounts |
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| section 213 (persons liable to charge), |
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| section 214 (individual’s lifetime allowance and standard lifetime |
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| section 215 (availability of individual’s lifetime allowance), and |
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| sections 216 to 222 (lifetime allowance enhancement factors). |
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(a) | references to “the individual”, in relation to the lifetime allowance |
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charge, are to the individual in relation to whom the benefit |
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crystallisation event giving rise to the charge occurs, and |
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(b) | references to “the pension scheme”, in relation to the lifetime allowance |
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charge, are to the pension scheme to which the benefit crystallisation |
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event giving rise to the charge, or the amount crystallised by it, relates. |
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(6) | Schedule 34 contains (in Part 2) transitional provision about the lifetime |
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(1) | The lifetime allowance charge is a charge in respect of the chargeable amount. |
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(2) | The lifetime allowance charge is a charge— |
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(a) | at the rate of 55% in respect of so much (if any) of the chargeable |
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amount as constitutes the lump-sum amount, and |
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(b) | at the rate of 25% in respect of so much (if any) of the chargeable |
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amount as constitutes the retained amount. |
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(3) | The “chargeable amount” is the aggregate of— |
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(a) | the basic amount, and |
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(b) | any amount which is treated as forming part of the lump-sum amount |
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under subsection (6) or of the retained amount under subsection (8). |
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(a) | if the first lifetime allowance condition is met, is the amount by which |
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the amount crystallised by the benefit crystallisation event exceeds the |
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amount of the individual’s lifetime allowance available on it, and |
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(b) | if the second lifetime allowance charge condition is met, is the amount |
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crystallised by the benefit crystallisation event. |
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(5) | The “lump-sum amount” is the aggregate of— |
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(a) | so much of the basic amount as is paid as a lump sum to the individual |
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or a lump sum death benefit in respect of the individual, and |
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(b) | any amount which is treated as forming part of the lump-sum amount |
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(6) | If and to the extent that the tax payable under this section on any of the lump- |
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sum amount is covered by a scheme-funded tax payment, it is to be treated as |
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itself forming part of the lump-sum amount. |
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(7) | The “retained amount” is the aggregate of— |
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(a) | so much of the basic amount as is not paid as a lump sum to the |
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individual or a lump sum death benefit in respect of the individual, and |
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(b) | any amount which is treated as forming part of the retained amount |
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(8) | If and to the extent that the tax payable under this section on any of the retained |
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amount is covered by a scheme-funded tax payment, it is to be treated as itself |
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forming part of the retained amount. |
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(9) | An amount of tax payable under this section is “covered by a scheme-funded |
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(a) | the tax is paid by the scheme administrator, and |
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(b) | the individual’s rights under the pension scheme are not reduced so as |
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fully to reflect the amount of the payment of tax. |
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(10) | Whether the individual’s rights under the pension scheme are reduced so as |
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fully to reflect the amount of the payment of tax is to be determined in |
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accordance with normal actuarial practice. |
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(11) | The chargeable amount is not to be treated as income for any purpose of the |
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212 | Benefit crystallisation events and amounts crystallised |
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(a) | the events which are benefit crystallisation events in relation to the |
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(b) | the amount which is crystallised by each of those events. |
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