Finance Act 2007 (c. 11)

SCHEDULES

SCHEDULE 19 U.K. Alternatively secured pensions and transfer lump sum death benefit etc

Inheritance tax U.K.

19 U.K. IHTA 1984 is amended as follows.

20 (1) Section 151A (person dying with alternatively secured pension fund) is amended as follows. U.K.

(2) For subsection (2) substitute—

“(2) Tax shall be charged on the relevant amount as if it were part of the value transferred by the transfer of value made on the member's death at the rate or rates at which it would be charged if it formed the highest part of that value.”

(3) In subsection (3)(a), after “death” insert “ but reduced by the amount of any previously charged income tax ”.

(4) After subsection (4) insert—

“(4A) In subsection (3)(a) above “the amount of any previously charged income tax” means the amount of any liability to income tax which (after the member's death but before the time when tax is charged on the transfer of value treated as made by the member on death) has arisen by virtue of the making of an unauthorised member payment under Part 4 of the Finance Act 2004 relating to the member's alternatively secured pension fund.

(4B) Subsection (4C) below applies where the maximum that could be transferred by the chargeable transfer made (under section 4 above) on the member's death if it were to be wholly chargeable to tax at the rate of nil per cent. exceeds—

(a) the value actually transferred by that chargeable transfer (or nil if there is no such chargeable transfer), less

(b) any previously untaxed alternatively secured pension fund amount.

(4C) Where this subsection applies, tax is to be charged on the previously untaxed alternatively secured pension fund amount as if the nil rate band maximum were—

where—

UNRB is the unused nil-rate band, that is the excess mentioned in subsection (4B) above, and

MUPR is the maximum unauthorised payment rate, that is the maximum aggregate rate at which tax is chargeable under Part 4 of the Finance Act 2004 in respect of an unauthorised member payment.”

(5) In subsection (5), at the end of the definition of “dependants' unsecured pension” (but before “and”) insert—

““previously untaxed alternatively secured pension fund amount” means so much of the aggregate mentioned in subsection (3)(a) above as has not given rise to any liability to tax by virtue of Part 4 of the Finance Act 2004 before tax is charged on the transfer treated as made by the member on death.”

(6) After that subsection insert—

“(6) This section applies in relation to a member who would have an alternatively secured pension fund immediately before death but for sub-paragraphs (6) and (7) of paragraph 11 of Schedule 28 to the Finance Act 2004 as if those sub-paragraphs were omitted (but subject as follows).

(7) In the case of such a member the references in subsection (3)(a) and (b) to the member's death are to the date on which the scheme administrator becomes aware of the member's death.”

21 (1) Section 151B (relevant dependant with pension fund inherited from member over 75) is amended as follows. U.K.

(2) In subsection (1)(b), after “before his death” insert “ (or would have but for paragraph 11(6) and (7) of Schedule 28 to the Finance Act 2004) ”.

(3) Omit subsection (5).

22 U.K. After that section insert—

“151BA Rate or rates of charge under section 151B

(1) Tax charged under section 151B above shall be charged at the rate or rates at which it would be charged on the death of the member if the amount mentioned in subsection (3) of that section (as reduced under subsection (4) of that section) (“the taxable amount”) had been included in the aggregate mentioned in section 151A(3)(a) above (but subject as follows).

(2) The rate or rates at which tax is charged on the taxable amount shall be determined as if the taxable amount had formed the very highest part of the value of the member's estate immediately before the member's death (above any amount which is part of that value apart from this section).

(3) The rate or rates at which tax is charged on the taxable amount shall be determined on the assumptions that—

(a) subsection (3)(b) of section 151A above were omitted, and

(b) the references in subsections (4A) and (5) of that section to the time when tax is charged on the transfer treated as made by the member on death were to the time when tax is charged under this section.

(4) Subsection (5) below applies where, before the time when the dependant dies or ceases to be a relevant dependant, there have been one or more reductions of tax by virtue of the coming into force of a substitution of a new Table in Schedule 1 to this Act since the member's death.

(5) The rate or rates at which tax is charged under section 151B above is to be determined as if the new Table effecting the reduction of tax (or the most recent reduction of tax) had been in force at the time of the member's death.”

23 (1) Section 151C (dependant dying with other pension fund) is amended as follows. U.K.

(2) For subsection (2) substitute—

“(2) Tax shall be charged on the relevant amount as if it were part of the value transferred by the transfer of value made on the dependant's death at the rate or rates at which it would be charged if it formed the highest part of that value.”

(3) In subsection (3)(a), after “death” insert “ but reduced by the amount of any previously charged income tax ”.

(4) After that subsection insert—

“(3A) In subsection (3)(a) above “the amount of any previously charged income tax” means the amount of any liability to income tax which (after the dependant's death but before the time when tax is charged on the transfer of value treated as made by the dependant on death) has arisen by virtue of the making of an unauthorised member payment under Part 4 of the Finance Act 2004 relating to the dependant's alternatively secured pension fund.

(3B) Subsection (3C) below applies where the maximum that could be transferred by the chargeable transfer made (under section 4 above) on death if it were to be wholly chargeable to tax at the rate of nil per cent. exceeds—

(a) the value actually transferred by that chargeable transfer, less

(b) any previously untaxed dependant's alternatively secured pension fund amount.

(3C) Where this subsection applies, tax is to be charged on the previously untaxed dependant's alternatively secured pension fund amount as if the nil rate band maximum were—

where—

UNRB is the unused nil rate band, that is the excess mentioned in subsection (3B) above; and

MUPR is the maximum unauthorised payment rate, that is the maximum aggregate rate at which tax is chargeable under Part 4 of the Finance Act 2004 in respect of an unauthorised member payment.

(3D) The relevant amount is to be reduced by the aggregate of so much of the sums and the value of the assets of the dependant's alternatively secured pension fund as arises, or (directly or indirectly) derives, from sums or assets forming part of an alternatively secured pension fund of the member which were designated as available for the payment of—

(a) dependants' unsecured pension, or

(b) dependants' alternatively secured pension,

to the dependant under the arrangement.”

(5) In subsection (4), omit “and” at the end of the definition of “dependant” and insert at the end—

““previously untaxed dependant's alternatively secured pension fund amount” means so much of the aggregate mentioned in subsection (3)(a) above as has not given rise to any liability to tax by virtue of Part 4 of the Finance Act 2004 before tax is charged on the transfer treated as made by the dependant on death.”

24 U.K. In section 216(6)(ac) (delivery of account)—

(a) after “occurs” insert “ , the scheme administrator becomes aware of the death ”, and

(b) insert at the end “ (depending on which occasions the charge) ”.

25 U.K. In section 226(4) (payment), after “Act” insert “ , or under section 151A above by virtue of subsection (6) of that section, ”.

26 U.K. In section 233(1)(c) (interest on unpaid tax), after “Act” insert “ , or under section 151A above by virtue of subsection (6) of that section, ”.

27 U.K. In Schedule 2 (provisions applying on reduction of tax), omit paragraph 6A.