Finance Bill

House of Commons

Session 2002 - 03
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Other Bills before Parliament

Finance Bill

Finance Bill
Part 4 — Pension schemes etc
Chapter 7 — Compliance
218

259
Winding-up to facilitate payment of lump sums
(1)
This section applies where the winding-up of a registered pension scheme has
begun and the Inland Revenue considers the pension scheme is being wound
up wholly or mainly for the purpose specified in subsection (2).
(2)
That purpose is facilitating the payment of winding-up lump sums or winding-
5
up lump sum death benefits (or both) under the pension scheme.
(3)
The scheme administrator is liable to a penalty not exceeding the relevant
amount.
(4)
The relevant amount is £3,000 in respect of—
(a)
each member to whom a winding-up lump sum is paid under the
10
pension scheme, and
(b)
each member in respect of whom a winding-up lump sum death benefit
is paid under the pension scheme.
260
Transfers to insured schemes
(1)
This section applies where sums held for the purposes of, or representing
15
accrued rights under, a registered pension scheme (“the transferor scheme”)
are transferred so as to become held for the purposes of, or to represent rights
under, a registered pension scheme that is an insured scheme (“the transferee
scheme”).
(2)
The scheme administrator of the transferor scheme is liable to a penalty not
20
exceeding £3,000 unless the sums are transferred either to the scheme
administrator of the transferee scheme or to a relevant insurance company.
(3)
In this section—

“insured scheme” means a pension scheme all the income and other assets
of which are invested in policies of insurance, and
25

“relevant insurance company” means an insurance company that issued
any of the policies of insurance.
Discharge of tax liability: good faith
261
Lifetime allowance charge
(1)
This section applies where the scheme administrator of a registered pension
30
scheme is liable to the lifetime allowance charge in respect of a benefit
crystallisation event.
(2)
The scheme administrator may apply to the Inland Revenue for the discharge
of the scheme administrator’s liability to the lifetime allowance charge in
respect of the benefit crystallisation event on the ground mentioned in
35
subsection (3).
(3)
The ground is that—
(a)
the scheme administrator reasonably believed that there was no
liability to the lifetime allowance charge in respect of the benefit
crystallisation event, and
40
(b)
in all the circumstances of the case, it would not be just and reasonable
for the scheme administrator to be liable to the lifetime allowance
charge in respect of the benefit crystallisation event.

Finance Bill
Part 4 — Pension schemes etc
Chapter 7 — Compliance
219

(4)
On receiving an application under subsection (2), the Inland Revenue must
decide whether to discharge the scheme administrator’s liability to the lifetime
allowance charge in respect of the benefit crystallisation event.
(5)
The scheme administrator may apply to the Inland Revenue for the discharge
of part of the scheme administrator’s liability to the lifetime allowance charge
5
in respect of the benefit crystallisation event on the ground mentioned in
subsection (6).
(6)
The ground is that—
(a)
the scheme administrator reasonably believed that the amount of the
lifetime allowance charge in respect of the benefit crystallisation event
10
was less than the actual amount, and
(b)
in all the circumstances of the case, it would not be just and reasonable
for the scheme administrator to be liable to an amount (“the excess
amount”) equal to the difference between the amount which the
scheme administrator believed to be the amount of the charge and the
15
actual amount.
(7)
On receiving an application under subsection (5), the Inland Revenue must
decide whether to discharge the scheme administrator’s liability to the lifetime
allowance charge in respect of the excess amount (or part of the excess
amount).
20
(8)
The discharge of the scheme administrator’s liability to the lifetime allowance
charge (or to the excess amount or part of the excess amount) does not affect
the liability of any other person to the lifetime allowance charge.
(9)
The Inland Revenue must notify the scheme administrator of the decision on
an application under this section.
25
(10)
Regulations made by the Board of Inland Revenue may make provision
supplementing this section; and the regulations may in particular make
provision as to the time limits for the making of an application.
262
Unauthorised payments surcharge and scheme sanction charge
(1)
This section applies where—
30
(a)
a person is liable to the unauthorised payments surcharge in respect of
an unauthorised payment, or
(b)
the scheme administrator of a registered pension scheme is liable to the
scheme sanction charge in respect of a scheme chargeable payment.
(2)
The person liable to the unauthorised payments surcharge may apply to the
35
Inland Revenue for the discharge of the person’s liability to the unauthorised
payments surcharge in respect of the unauthorised payment on the ground
mentioned in subsection (3).
(3)
The ground is that in all the circumstances of the case, it would be not be just
and reasonable for the person to be liable to the unauthorised payments
40
surcharge in respect of the payment.
(4)
On receiving an application by a person under subsection (2) the Inland
Revenue must decide whether to discharge the person’s liability to the
unauthorised payments surcharge in respect of the payment.
(5)
The scheme administrator may apply to the Inland Revenue for the discharge
45
of the scheme administrator’s liability to the scheme sanction charge in respect

Finance Bill
Part 4 — Pension schemes etc
Chapter 7 — Compliance
220

of a scheme chargeable payment on the ground mentioned in subsection (6) or
(7).
(6)
In the case of a scheme chargeable payment which is treated as being an
unauthorised member payment by section 168 (assignment), the ground is
that, in all the circumstances of the case, it would not be just and reasonable for
5
the scheme administrator to be liable to the scheme sanction charge.
(7)
In any other case, the ground is that—
(a)
the scheme administrator reasonably believed that the unauthorised
payment was not a scheme chargeable payment, and
(b)
in all the circumstances of the case, it would not be just and reasonable
10
for the scheme administrator to be liable to the scheme sanction charge
in respect of the unauthorised payment.
(8)
On receiving an application under subsection (5), the Inland Revenue must
decide whether to discharge the scheme administrator’s liability to the scheme
sanction charge in respect of the unauthorised payment.
15
(9)
The Inland Revenue must notify the applicant of the decision on an application
under this section.
(10)
Regulations made by the Board of Inland Revenue may make provision
supplementing this section; and the regulations may in particular make
provision as to the time limits for the making of an application.
20
263
Appeal against decision on discharge of liability
(1)
This section applies where the Inland Revenue—
(a)
decides to refuse an application under section 261(2) (discharge of
liability to lifetime allowance charge) or section 262 (discharge of
liability to unauthorised payments surcharge or scheme sanction
25
charge), or
(b)
on an application under section 261(5), decides to refuse the application
or to discharge the applicant’s liability to the lifetime allowance charge
in respect of part only of the excess amount.
(2)
The applicant may appeal against the decision.
30
(3)
The appeal is to the General Commissioners, except that the person 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
35
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 applicant was given
40
notification of the decision.
(6)
The Commissioners before whom an appeal under subsection (1)(a) is brought
must consider whether the applicant’s liability to the lifetime allowance
charge, unauthorised payments surcharge or scheme sanction charge ought to
have been discharged.
45

Finance Bill
Part 4 — Pension schemes etc
Chapter 7 — Compliance
221

(7)
If they consider that the applicant’s liability ought not to have been discharged,
they must dismiss the appeal.
(8)
If they consider that the applicant’s liability ought to have been discharged,
they must grant the application.
(9)
The Commissioners before whom an appeal under subsection (1)(b) is brought
5
must consider whether the applicant’s liability to the lifetime allowance charge
ought to have been discharged in respect of the excess amount or a greater part
of the excess amount.
(10)
If they consider that the applicant’s liability ought not to have been discharged
in respect of the excess amount or a greater part of the excess amount, they
10
must dismiss the appeal.
(11)
If they consider that the applicant’s liability ought to have been discharged in
respect of the excess amount or a greater part of the excess amount, they must
discharge the applicant’s liability in respect of the excess amount or that part
of the excess amount.
15
Scheme administrator
264
Meaning of “scheme administrator”
(1)
References in this Part to the scheme administrator, in relation to a pension
scheme, are to the person who is, or persons who are, appointed in accordance
with the rules of the pension scheme to be responsible for the discharge of the
20
functions conferred or imposed on the scheme administrator of the pension
scheme by and under this Part.
(2)
But a person cannot be the person who is, or one of the persons who are, the
scheme administrator of a pension scheme unless the person—
(a)
is resident in the United Kingdom or another state which is a member
25
State or a non-member EEA State, and
(b)
has made the required declaration to the Inland Revenue.
(3)
“The required declaration” is a declaration that the person—
(a)
understands that the person will be responsible for discharging the
functions conferred or imposed on the scheme administrator of the
30
pension scheme by and under this Part, and
(b)
intends to discharge those functions at all times, whether resident in the
United Kingdom or another state which is a member State or a non-
member EEA State.
(4)
“Non-member EEA State” means a State which is a contracting party to the
35
Agreement on the European Economic Area signed at Oporto on 2nd May 1992
(as adjusted by the Protocol signed at Brussels on 17th March 1993) but which
is not a member State.
265
Liability of scheme administrator
(1)
Any liability of a person who is, or of any of the persons who are, the scheme
40
administrator of a registered pension scheme ceases to be a liability of that
person on the person ceasing to be, or to be one of the persons who is, the
scheme administrator of the pension scheme.

Finance Bill
Part 4 — Pension schemes etc
Chapter 7 — Compliance
222


This subsection does not apply to a liability to pay a penalty and is subject to
subsection (4).
(2)
Where a person becomes, or becomes one of the persons who is, the scheme
administrator of a registered pension scheme, the person assumes any existing
liabilities of the scheme administrator of the pension scheme, other than any
5
liability to pay a penalty.
(3)
Subsection (4) applies where, on the person who is or the persons who are the
scheme administrator of a registered pension scheme ceasing to be the scheme
administrator, there is no scheme administrator of the pension scheme.
(4)
Any liability of the person or persons as scheme administrator remains a
10
liability of that person or those persons as if still the scheme administrator
(unless dead or having ceased to exist) until another person becomes, or other
persons become, the scheme administrator of the pension scheme.
(5)
But a person who retains, or persons who retain, any liability by virtue of
subsection (4) may apply to the Inland Revenue to be released from the
15
liability.
(6)
On receipt of the application the Inland Revenue must decide whether or not
to release the applicant or applicants from the liability and must notify the
applicant, or each of the applicants, of the decision.
(7)
If the decision is not to release the applicant or applicants from the liability the
20
applicant or applicants may appeal against the decision.
(8)
The appeal is to the General Commissioners, except that the applicant or
applicants may elect (in accordance with section 46(1) of TMA 1970) to bring
the appeal before the Special Commissioners instead of the General
Commissioners.
25
(9)
The appeal must be brought within the period of 30 days beginning with the
day on which the applicant was notified of the decision.
(10)
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
Commissioners before whom an appeal under this section is to be brought, but
30
subject to modifications specified in an order made by the Board of Inland
Revenue.
(11)
The Commissioners before whom an appeal under this section is brought must
consider whether the applicant or applicants ought to have been released from
the liability.
35
(12)
If they decide that the applicant or applicants ought not to have been released
from the liability, they must dismiss the appeal.
(13)
If they decide that the applicant or applicants ought to have been released from
the liability, the applicant is, or applicants are, to be treated as having been
released from the liability (but subject to any further appeal or any
40
determination on, or in consequence of, a case stated).
266
Trustees etc. liable as scheme administrator
(1)
This section applies in relation to a registered pension scheme if—
(a)
there is no scheme administrator of the pension scheme and no-one
who remains subject to the liabilities of the scheme administrator by
45

Finance Bill
Part 4 — Pension schemes etc
Chapter 7 — Compliance
223

virtue of section 265(4) (continuation of liability where no scheme
administrator),
(b)
the person who is, or all the persons who are, the scheme administrator
of the pension scheme or remain so subject cannot be traced, or
(c)
the person who is, or all the persons who are, the scheme administrator
5
of the pension scheme or remain so subject are in serious default.
(2)
Any person who assumes liability by reason of this section applying in relation
to the pension scheme—
(a)
is liable to pay any tax (and any interest on tax) due from the scheme
administrator of the pension scheme by virtue of this Part, and
10
(b)
is responsible for the discharge of all other obligations imposed on the
scheme administrator of the pension scheme by or under this Part.
(3)
In subsection (2)—
(a)
the references in paragraph (a) to tax, and interest on tax, include any
that has become due before this section applied in relation to the
15
pension scheme and remains unpaid, and
(b)
the reference in paragraph (b) to obligations includes any that have
become due before this section applied in relation to the pension
scheme and remain unsatisfied, other than any liability to pay a penalty
which has become due before this section so applied.
20
(4)
The following heads specify the persons who assume liability by reason of this
section applying in relation to the pension scheme; but if—
(a)
a person assumes, or persons assume, liability by virtue of being
specified under one head, and
(b)
that person, or any of those persons, can be traced and is not in default,
25

no-one assumes liability by virtue of being specified under a later head.

Head 1
If there are one or more trustees of the pension scheme who are resident in the
United Kingdom, that trustee or each of those trustees.
30
Head 2
If there are one or more persons who control the management of the pension
scheme, that person or each of those persons.
Head 3
If alive or still in existence, the person, or any of the persons, who established
35
the pension scheme and any person by whom that person, or any of those
persons, has been directly or indirectly succeeded in relation to the provision
of benefits under the pension scheme.
Head 4
If the pension scheme is an occupational pension scheme, any sponsoring
40
employer.
Head 5
If there are one or more trustees of the pension scheme who are not resident in
the United Kingdom, that trustee or each of those trustees.
(5)
Where a person assumes liability by reason of this section applying in relation
45
to the pension scheme, the Inland Revenue must, as soon as is reasonably
practicable, notify the person of that fact; but failure to do so does not affect the
person’s liability.

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Part 4 — Pension schemes etc
Chapter 7 — Compliance
224

(6)
For the purposes of this section a person is in default if the person—
(a)
has failed to pay all or any of the tax (or interest on tax) due from the
person by virtue of this Part, or
(b)
has failed to discharge any other obligation imposed on the person by
or under this Part,
5

and a person in default is in serious default if the Inland Revenue considers the
failure to be of a serious nature.
267
Members liable as scheme administrator
(1)
This section applies in relation to a registered pension scheme if—
(a)
a person has, or persons have, assumed liability by reason of section 266
10
(trustees etc.) applying in relation to the pension scheme,
(b)
the person has, or the persons have, become liable to pay tax (or interest
on tax) which became due by virtue of section 235 (scheme sanction
charge) or section 238 (de-registration charge) before section 266
applied in relation to the pension scheme,
15
(c)
that person, or each of those persons, has failed (in whole or in part) to
satisfy the liability, and
(d)
that person, or each of those persons, has either died or ceased to exist
or is a person in whose case the Inland Revenue considers the person’s
failure to satisfy the liability to be of a serious nature.
20
(2)
Any person who was a member of the pension scheme at any time during the
relevant three-year period is liable to pay the appropriate share of the unpaid
amount if—
(a)
any of the conditions in subsection (5) is met, and
(b)
the Inland Revenue notifies the person of the person’s liability to do so.
25
(3)
“The relevant three-year period” is the period of three years ending with the
date on which the liability to pay the tax arose.
(4)
The “appropriate share of the unpaid amount”, in the case of a person, is
where—
AA is an amount equal to aggregate of the amount of the sums and the
30
market value of the assets held for the purposes of the pension scheme
at the time when the liability to pay the tax arose,
AAP is an amount equal to so much of AA as is held for the purposes of
such of the arrangements under the pension scheme as relate to the
person or a person connected with the person, and
35
UT is so much of the tax (and any interest on it) as remains unpaid.
(5)
The conditions referred to in subsection (2)(a) are—
(a)
that the pension scheme was established by a person or body specified
in section 151(1)(a) to (g) (insurance companies etc.) and was not an
occupational pension scheme,
40
(b)
that at any time during the relevant three-year period the pension
scheme received a transfer value in which there were represented
relevant personal pension contributions made by or in respect of the
person,