The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006

Statutory Instruments

2006 No. 207

INCOME TAX

The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006

Made

1st February 2006

Laid before the House of Commons

2nd February 2006

Coming into force

6th April 2006

The Commissioners for Her Majesty’s Revenue and Customs, in exercise of the powers conferred upon them by paragraphs 3(2), (5) and (6), 4(2) and (4), 7, 12 and 19 of Schedule 34 to the Finance Act 2004(1), make the following Regulations:

PART 1 U.K. Introduction

Citation, commencement and interpretation U.K.

1.—(1) These Regulations may be cited as the Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 and shall come into force on 6^th April 2006.

(2) In these Regulations—

“the Act” means the Finance Act 2004 any reference (without more) to a numbered section or Schedule is a reference, as the case requires, to the section of, or Schedule to, the Act which bears that number;

“benefit crystallisation event 8” means the event which constitutes benefit crystallisation event 8 in section 216;

“recognised overseas pension scheme” has the meaning given by section 150(8); and

“relevant non-UK scheme” has the same meaning given by paragraph 1(5) of Schedule 34.

[F1 “taxable property” has the meaning in Schedule 29A to the Act;

“taxable property provisions” has the meaning in paragraph 1(3) of that Schedule; and

“transfer member” of a scheme has the meaning in paragraph 1(8) of Schedule 34 to the Act.]

Textual Amendments

F1 Words in reg. 1(2) inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 3

Commencement Information

I1 Reg. 1 in force at 6.4.2006, see reg. 1(1)

PART 2 U.K. Application and computation of UK tax charges

Computation of a member’s UK tax-relieved fund under a relevant non-UK scheme U.K.

2.  The amount of a member’s UK tax-relieved fund under a relevant non-UK scheme is the aggregate of—

(a) the amounts which, for each tax year before that in which the computation falls to be made, would have been arrived at in relation to arrangements under the relevant non-UK scheme relating to the individual as pension input amounts under sections 230 to 238 of the Act (annual allowance) as they apply by virtue of paragraph 8 of Schedule 34 to the Act, and

(b) the amount which would be so arrived at if the period beginning with 6^th April of the tax year in which the computation falls to be made; and ending immediately before the making of the computation, were a tax year,

assuming that section 229(3) did not apply.

Commencement Information

I2 Reg. 2 in force at 6.4.2006, see reg. 1(1)

Computation of a member’s relevant transfer fund U.K.

3.  The amount of a member’s relevant transfer fund under a relevant non-UK scheme (that scheme being referred to here as “the RNUKS”) is the sum of—

(a) the amount crystallised by virtue of benefit crystallisation event 8 on the transfer from a UK registered scheme to the RNUKS; and

(b) so much of the member’s UK tax-relieved fund under any other relevant non-UK scheme as has been transferred to the RNUKS but has not been subject to the unauthorised payments charge; and

(c) so much of the member’s relevant transfer fund under any other relevant non-UK scheme as has been transferred to the RNUKS—

(i) without being subject to the unauthorised payments charge; F2 ...

F2 (ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F2 Reg. 3(c)(ii) and word omitted (retrospective to 6.4.2006) by virtue of The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 4

Commencement Information

I3 Reg. 3 in force at 6.4.2006, see reg. 1(1)

[F3 Computation of a member’s taxable asset transfer fund U.K.

3A.— (1)  The amount of a member’s taxable asset transfer fund under a relevant non-UK scheme (“the RNUKS”) is the sum of—

(a) the amount crystallised by virtue of benefit crystallisation event 8 on the transfer from a UK registered pension scheme to the RNUKS; and

(b) so much of the member’s taxable asset transfer fund under any other relevant non-UK scheme as has been transferred to the RNUKS without being subject to the unauthorised payments charge.

(2) Accordingly, the member’s taxable asset transfer fund (“TATF”) shall form part of the member’s relevant transfer fund (“RTF”), except in a case where the member’s RTF consists solely of a UK tax-relieved fund which has been transferred to the RNUKS.]

Textual Amendments

F3 Reg. 3A inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 5

Attributing payments to particular funds under a relevant non-UK scheme U.K.

4.—(1) This regulation applies to determine to which part of a relevant non-UK scheme a payment to, or in respect of, a member is referable.

(2) It shall be assumed that—

(a) payments made by the scheme to or in respect of the member are made out of the member’s UK tax-relieved fund in priority to any other fund under that scheme; and

(b) the amount of the member’s UK tax-relieved fund is reduced [F4 (but not below nil)] by the amount paid out of the scheme.

(3) If the member’s UK tax-relieved fund is nil, or has been reduced to nil, [F5 the following Rules apply (with an earlier Rule applying in preference to a later Rule).

• Rule 1

  Where an unauthorised payment is treated as made by the scheme to the transfer member by virtue of section 174A—

  (a)

  the payment shall be treated as made out of the member’s RTF and TATF, but

  (b)

  the interest in taxable property, in respect of which the unauthorised payment is treated as made, shall represent the payment and form part of the member’s RTF and TATF (an “appropriated asset”), up to an amount equal to the amount of that payment.

• Rule 2

  Accordingly, if a scheme transfers that appropriated asset (or an interest in a vehicle through which the scheme holds the interest in the taxable property indirectly), or part of it, to another pension scheme, that transfer shall be treated as a transfer of the whole or part, as the case may be, of the member’s RTF and TATF (limited to the amount of the unauthorised payment) to that other scheme, falling (if appropriate) within regulation 3A(1)(b).

• Rule 3

  If a scheme disposes of (other than to another pension scheme) an appropriated asset (or an interest in a vehicle through which the scheme holds the interest in the taxable property indirectly), or part of it, any other property which directly or indirectly represents proceeds of either of those interests (limited to the amount of the unauthorised payment) shall form part of the member’s RTF and TATF.

• Rule 4

  This Rule applies to payments made by the scheme to or in respect of the member, other than—

  (a)

  a transfer of an interest in taxable property or an interest in a vehicle through which the scheme holds the interest in the taxable property indirectly, and

  (b)

  payments treated as made by virtue of section 174A.

  So far as the member’s RTF and TATF are not represented by appropriated assets—

  (a)

  where the member has both an RTF and a TATF, and the amount of his RTF exceeds the amount of his TATF, such payments shall, to the extent of that excess, be treated as made out of his RTF (but not his TATF) and as reducing the RTF, and subject thereto

  (b)

  such payments are made out of the member’s RTF and TATF in priority to any other fund under that scheme, and reduce (but not below nil) the amount of the RTF and TATF.]

[F6 (4)  In paragraph (3), references to payments made or treated as made by virtue of section 174A include references to payments treated as made by regulations under paragraph 37 of Schedule 29A, or paragraph 7A of Schedule 34, to the Act]

Textual Amendments

F4 Words in Reg. 4(2)(b) inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 6

F5 Words in Reg. 4(3) substituted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 7

F6 Reg. 4(4) inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 8

Commencement Information

I4 Reg. 4 in force at 6.4.2006, see reg. 1(1)

[F7 Taxable property provisions to apply to a transfer member of a relevant non-UK scheme (to payments referable to his taxable asset transfer fund) U.K.

4A.   The—

(a) taxable property provisions, and

(b) regulations made under paragraph 37 of Schedule 29A or paragraph 7A of Schedule 34,

apply to a transfer member of a relevant non-UK scheme, in relation to payments treated as made by those provisions or regulations which are referable to the member’s taxable asset transfer fund under the scheme, but subject to the modifications in regulations 4B to 4D.]

Textual Amendments

F7 Regs. 4A-4D inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 9

[F7 Unauthorised payments charge to apply (in lieu of scheme chargeable payment) U.K.

4B.— (1)  The scheme chargeable payment provisions in sections 185A to 185I shall not apply to a relevant non-UK scheme.

(2) But, during such time as an appropriated asset forms the whole or part of a transfer member’s TATF—

(a) the scheme shall be treated as making unauthorised payments to that member equal in amount to the scheme chargeable payments (in respect of income and gains) which would have been computed in accordance with those sections, and

(b) the transfer member shall be liable to pay the unauthorised payments charge in respect of such payments.

(3) Where the scheme’s interest in taxable property is not wholly referable to the transfer member’s TATF, the amount of the unauthorised payment shall be proportionately reduced.]

Textual Amendments

F7 Regs. 4A-4D inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 9

[F7 Modification of paragraph 15 of Schedule 29A U.K.

4C.   Paragraph 15 of Schedule 29A applies to the transfer member of a relevant non-UK scheme as if “insurance company” included any person—

(a) resident in a country or territory outside the European Economic Area,

(b) whose business consists of, or includes, the effecting or carrying out of contracts of long-term insurance (within the meaning in Part 2 of Schedule 1 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001), and

(c) who is regulated in the conduct of that business by—

(i) the government of that country or territory, or

(ii) a body established under the law of that country or territory for the purpose of regulating such business.]

Textual Amendments

F7 Regs. 4A-4D inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 9

[F7 Modifications of paragraphs 29 and 31 of Schedule 29A U.K.

4D.— (1)  This regulation applies where—

(a) a relevant non-UK scheme acquires an interest in taxable property;

(b) the interest is acquired in the circumstances mentioned in paragraph 32(3), (5) (excluding paragraphs (a) and (b)) or (6) (excluding paragraphs (a) and (b)) of Schedule 29A; and

(c) the whole or part of the consideration for the acquisition is rent.

(2) The amount of the consideration (or the part that is rent) shall not be the relevant rental value of the property (as provided by paragraph 34(2) of Schedule 29A).

(3) Each payment of rent (or the aggregate of such payments during a year, if there are more than one) shall be treated, for the purposes of the taxable property provisions, as if the pension scheme or other person who acquired the interest were being granted a lease for the period for which the rent is paid, in consideration of the rent (or aggregate) so paid.]

Textual Amendments

F7 Regs. 4A-4D inserted (retrospective to 6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes)(Amendment) Regulations 2006 (S.I. 2006/1960), regs. 1(2), 9

PART 3 U.K.

Modifications to Part 4 of the Finance Act 2004 in respect of relevant non-UK schemes U.K.

5.  Part 4 of the Finance Act 2004 shall be modified in respect of relevant non-UK schemes, within the meaning of paragraph 1(5) of Schedule 34, in accordance with the following provisions of these Regulations.

Commencement Information

I5 Reg. 5 in force at 6.4.2006, see reg. 1(1)

Modification of pension rules U.K.

6.  In section 165, in pension rules 4 and 6 omit from “but a scheme pension” to the end.

Commencement Information

I6 Reg. 6 in force at 6.4.2006, see reg. 1(1)

Modification of pension death benefit rules U.K.

7.  In section 167 in pension death benefit rules 3 and 5 omit from “but a dependants' scheme pension” to the end.

Commencement Information

I7 Reg. 7 in force at 6.4.2006, see reg. 1(1)

Modification of section 227 U.K.

8.  In section 227(3)(b) for “scheme administrator” substitute “scheme manager”.

Commencement Information

I8 Reg. 8 in force at 6.4.2006, see reg. 1(1)

Modification of section 231 U.K.

9.  In section 231—

(a) in subsection (3)—

(i) in paragraph (b) for “the retail prices index” substitute “a relevant index”;

(ii) omit paragraph (c); and

(b) at the end add—

“(4) In this section “relevant index” means—

(a) an index of the movement of retail prices maintained, or officially recognised, by the government of the country or territory in which the recognised overseas scheme is established; or

(b) if there is no such index as is mentioned in paragraph (a) of this definition, the retail prices index.”.

Commencement Information

I9 Reg. 9 in force at 6.4.2006, see reg. 1(1)

Modification of section 235 U.K.

10.  In section 235—

(a) in subsection (3)—

(i) in paragraph (b) for “the retail prices index” substitute “a relevant index”;

(ii) omit paragraph (c); and

(b) at the end of the section add—

“(4) In this section “relevant index” means—

(a) an index of the movement of retail prices maintained, or officially recognised, by the government of the country or territory in which the recognised overseas scheme is established; or

(b) if there is no such index as is mentioned in paragraph (a) of this definition, the retail prices index.”.

Commencement Information

I10 Reg. 10 in force at 6.4.2006, see reg. 1(1)

Modification of section 275 U.K.

11.—(1) In the heading of section 275 at the end add “and Non-EEA annuity provider”.

(2) At the end of the section add—

“(3) In this Part “non-EEA annuity provider” means a person resident in a country or territory outside the European Economic Area—

(a) whose normal business includes the provision of annuities; and

(b) who is regulated in the conduct of that business—

(i) by the government of that country or territory; or

(ii) a body established under the law of that country or territory for the purpose of regulating such business.”.

Commencement Information

I11 Reg. 11 in force at 6.4.2006, see reg. 1(1)

Modification of section 276 U.K.

12.  In section 276(2) for “scheme administrator” substitute “scheme manager”.

Commencement Information

I12 Reg. 12 in force at 6.4.2006, see reg. 1(1)

Modification of section 279 U.K.

13.—(1) Section 279(1) shall be modified as follows.

(2) At the appropriate points in the alphabetical list insert—

““applicable pension scheme”, in relation to a pension sharing order in respect of a member’s spouse[F8 , ex-spouse, civil partner or former civil partner], means a scheme which is—

(a)

a recognised overseas pension scheme within the meaning of this Part; or

(b)

a scheme which is recognised for tax purposes under the law of either the country or territory in which it is situate or that of the country or territory in which the pension sharing order is made;”;(2) and

““ex-spouse”, in relation to a member, means the other party to a marriage with the member that has been dissolved or annulled;

[F9 “former civil partner” in relation to a member means the other party to a civil partnership with the member that has been dissolved or annulled.”];

(3) For the definitions of “pension credit” and “pension debit” substitute—

• ““pension credit” and “pension debit” mean respectively the amount by which—

  (a)

  the entitlement of a member’s spouse[F10 , ex-spouse, civil partner or former civil partner] under an applicable pension scheme, is increased; and

  (b)

  the entitlement of a member under a qualifying recognised overseas pension scheme is decreased,

  pursuant to a pension sharing order;.”.

(4) For the definition of “pension sharing order or provision” substitute—

““pension sharing order” means an order of a court, by virtue of which amounts are transferred from a recognised overseas pension scheme of a member to an applicable pension scheme of that member’s spouse[F11 , ex-spouse, civil partner or former civil partner], in or in connection with proceedings relating to the dissolution or annulment of the marriage [F12 or civil partnership] of the parties;”.

Textual Amendments

F8 Words in reg. 13(2) substituted for word (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 3(2)(a)

F9 Words in reg. 13(2) added (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 3(2)(b)

F10 Words in reg. 13(3)(a) substituted for word (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 3(3)

F11 Words in reg. 13(4) substituted for word (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 3(4)(a)

F12 Words in reg. 13(4) inserted (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 3(4)(b)

Commencement Information

I13 Reg. 13 in force at 6.4.2006, see reg. 1(1)

Modification of Schedule 28 U.K.

14.—(1) Schedule 28 is modified as follows.

(2) In paragraph 1—

(a) in sub-paragraph (a) after “registered medical practitioner” insert “or a recognised medical practitioner”;

(b) at the end of the paragraph add—

“In this paragraph “recognised medical practitioner” means a medical practitioner practising outside the United Kingdom who is authorised, licensed or registered to practise medicine in the country or territory, outside the United Kingdom, in which either the scheme or the member is resident.”.

(3) In the following provisions for “scheme administrator” substitute “scheme manager”.

The provisions are—

(a) paragraph 1(a);

(b) paragraph 2 (in each place where the expression occurs);

(c) paragraph 10(3)(b);

(d) paragraph 13(3);

(e) paragraph 16(1) and (2);

(f) paragraph 24(3)(b); and

(g) paragraph 27(3).

(4) Omit paragraphs 3(1)(b), 6(1)(c), 17(1)(b) and 20(1)(c).

(5) In paragraph 15(2)(b) and (3) omit “, in the opinion of the scheme administrator”.

(6) At the end of the Schedule add—

“PART 3 U.K. Relevant Non UK Schemes- interpretation

Construction of references to insurance companies

28.— (1) In this Schedule, in its application to a scheme established in a country or territory outside the European Economic Area, any reference to an insurance company includes a non-EEA annuity provider.

(2) Section 275(3) defines “non-EEA annuity provider”.”.

Commencement Information

I14 Reg. 14 in force at 6.4.2006, see reg. 1(1)

Modification of Schedule 29 U.K.

15.—(1) Schedule 29 is modified as follows.

(2) In paragraph 1 after sub-paragraph (4) insert—

“(4A) In determining whether all or part of the member’s lifetime allowance is available—

(a) an amount treated as crystallising by virtue of benefit crystallisation event 8 shall be disregarded; and

(b) the amount of the allowance available shall be reduced by the aggregate of—

(i) the amount of any previous pension commencement lump sum paid to or in respect of the member by a recognised overseas pension scheme, to the extent that the lump sum is referable to the member’s relevant transfer fund, and

(ii) the amount which would have crystallised by virtue of the member becoming entitled to a pension, had the scheme paying it been a registered pension scheme, to the extent that it is so referable.

(4B) For the purposes of sub-paragraph (4A) “the member’s relevant transfer fund” has the meaning given in paragraph 4(2) of Schedule 34(3).”.

(3) In paragraph 2—

(a) in sub-paragraph (6) for the definition of AAC substitute—

“AAC is the aggregate of—

(a) the amounts crystallised by each benefit crystallisation event (other than benefit crystallisation event 8) which has occurred in relation to the member before the member becomes entitled to the lump sum (or treated as crystallised) on each occasion on which entitlement to a pension arises; and

(b) the amount which would have crystallised, had the scheme paying it been a registered pension scheme —

(i) on entitlement arising to any pension commencement lump sum, to the extent that the lump sum is referable to the member’s relevant transfer fund, or

(ii) on entitlement arising to a pension, to the extent that it is so referable.”;

(b) after sub-paragraph (6) insert—

“(6A) The member’s becoming entitled to a pension commencement lump sum, or to a pension, as mentioned in paragraph (b) of the definition of AAC in paragraph (6) shall be treated as a benefit crystallisation event for the purposes of sub-paragraph (7).”.

(4) In paragraph 4—

(a) in sub-paragraph (1)(a) after “registered medical practitioner” insert “or a recognised medical practitioner”;

(b) at the end of the paragraph add—

“(3) In sub-paragraph (1) “recognised medical practitioner” means a medical practitioner practising outside the United Kingdom who is authorised, licensed or registered to practise medicine in the country or territory, outside the United Kingdom, in which either the scheme or the member is resident.

(4) In determining whether all or part of the member’s lifetime allowance is available—

(a) an amount crystallising by virtue of benefit crystallisation event 8 shall be disregarded; and

(b) the amount of the allowance available shall be reduced by the aggregate of—

(i) the amount of any previous pension commencement lump sum which has been paid to or in respect of the member by a recognised overseas pension scheme, to the extent that it is referable to the member’s relevant transfer fund and

(ii) the amount which would have crystallised on the member becoming entitled to a pension, had the scheme paying it been a registered pension scheme, to the extent that it is so referable.”.

(5) In paragraph 5(1)(c) after “benefit crystallisation event” insert—

• “, other than an event which constitutes benefit crystallisation event 8”.

(6) At the end of paragraph 7 add—

“(6) In determining whether all or part of the member’s lifetime allowance is available—

(a) an amount crystallising by virtue of benefit crystallisation event 8 shall be disregarded; and

(b) the amount of the allowance available shall be reduced by the aggregate of—

(i) the amount of any previous pension commencement lump sum which has been paid to or in respect of the member by a recognised overseas pension scheme, to the extent that it is referable to the member’s relevant transfer fund and

(ii) the amount which would have crystallised on the member becoming entitled to a pension, had the scheme paying it been a registered pension scheme, to the extent that it is so referable.”.

(7) At the end of paragraph 10 add—

“(4) In determining whether all or part of the member’s lifetime allowance is available—

(a) an amount crystallising by virtue of benefit crystallisation event 8 shall be disregarded; and

(b) the amount of the allowance available shall be reduced by the aggregate of—

(i) the amount of any previous pension commencement lump sum which has been paid to or in respect of the member by a recognised overseas pension scheme, to the extent that the lump sum is referable to the member’s relevant transfer fund, and

(ii) the amount which would have crystallised on the member becoming entitled to a pension, had the scheme paying it been a registered pension scheme, to the extent that it is so referable.”.

(8) In paragraph 11 after sub-paragraph (b) insert—

“(bb) it is not paid from the relevant transfer fund of a qualifying recognised overseas pension scheme,”.

(9) In paragraph 4(1)(a), and paragraph 19(1)(d) and (2)(e) for “scheme administrator” substitute “scheme manager”.

Commencement Information

I15 Reg. 15 in force at 6.4.2006, see reg. 1(1)

Modification of Schedule 32 U.K.

16.  In paragraph 11(6) of Schedule 32—

(a) for “the retail prices index” (in both places) substitute “a relevant index”; and

(b) at the end add—

“Here “relevant index” means—

(a)

an index of the movement of retail prices maintained, or officially recognised, by the government of the country or territory in which the recognised overseas scheme is established; or

(b)

if there is no such index as is mentioned in paragraph (a) of this definition, the retail prices index.”.

Commencement Information

I16 Reg. 16 in force at 6.4.2006, see reg. 1(1)

Modification of Schedule 34 U.K.

17.  In Schedule 34 after paragraph 19 add—

“Revenue and Customs discretion

19A.— (1) Sub-paragraph (2) applies to—

(a) the member payment provisions to a payment made (or treated by this Part as made) to or in respect of—

(i) a relieved member of a relevant non-UK scheme, or

(ii) a transfer member of such a scheme;

(b) the annual allowance provisions in relation to an individual who is a currently-relieved member of a currently-relieved non-UK scheme; and

(c) the lifetime allowance provision charge in relation to an individual who is a relieved member of a relieved non-UK pension scheme.

(2) If it appears to an officer of Revenue and Customs that, by reason of some non-compliance with the requirements set out in this Part, which in the officer’s view does not materially affect the nature of a payment, the payment, or the member in respect of whom it is payable, would be treated less favourably by the strict application of the provisions mentioned in paragraph (1) than in the officer’s view is appropriate, sub-paragraph (3) applies.

(3) If this sub-paragraph applies, an officer of Revenue and Customs—

(a) may decide, and

(b) if requested to do so by a member falling within any of the descriptions in paragraphs (a) to (c) of sub-paragraph (1), shall decide,

whether, notwithstanding the non-compliance referred to in sub-paragraph (2), the treatment which, but for that non-compliance, would have applied under this Part should apply to the payment or the member (as the case may be).

This is subject to the qualification in sub-paragraph (4).

(4) An officer of Revenue and Customs shall not make a decision under sub-paragraph (3) that, notwithstanding the difference referred to in sub-paragraph (2), the provisions of this Part shall apply to the payment or the member unless—

(a) it appears to the officer that the effect of the decision would be to reduce the total cumulative tax liability in respect of the charges mentioned in subparagraph (1) of the member whose tax liability would be affected by it, taking one year with another;

(b) the officer has first given at least 28 days' notice of his intention to make the decision to the member whose tax liability would by affected by it; and

(c) the member has—

(i) consented to the making of the decision; or

(ii) failed to respond to the notice within the period specified in paragraph (b).

(5) If an officer of Revenue and Customs decides under sub-paragraph (3) that—

(a) the conditions for the exercise of his discretion under that paragraph are not met; or

(b) the conditions for its exercise are met, but that it is otherwise inappropriate for him to exercise it in favour of the member,

the member may appeal against the decision.

(6) Subsections (3) to (5) of section 170 apply for the purposes of a decision by an officer of Revenue and Customs under sub-paragraph (3) as they apply to a decision under section 169(5).

(7) The Commissioners before whom an appeal under paragraph (5) is brought must consider—

(a) whether the conditions for the exercise of the discretion of an officer of Revenue and Customs have been met; and

(b) if they are satisfied that those conditions have been met, whether the discretion ought to have been exercised in favour of the member.

(8) If they decide that the conditions for the exercise of that discretion have not been met, they must dismiss the appeal.

(9) If they decide that the conditions for the exercise of that discretion have been met, they must decide whether the discretion ought to have been exercised in favour of the member.

(10) If they decide that although the conditions are met, the discretion ought not to have been exercised in favour of the member, they must dismiss the appeal.

(11) If they decide that the discretion ought to have been exercised in favour of the member they may so decide and the provisions of this Part shall apply accordingly to the member or the payment in question (as the case may be).

(12) A decision under sub-paragraph (8) or (10) is final but subject to any further appeal or any determination on, or in consequence of, a case stated.”.

Commencement Information

I17 Reg. 17 in force at 6.4.2006, see reg. 1(1)

David Varney

Steve Lamey

Two of the Commissioners for Her Majesty’s Revenue and Customs

1st February 2006

Explanatory Note

(This note is not part of the Regulations)

These Regulations serve two purposes. First, they provide a method of computing the amount to be charged to UK tax in respect of a payment by a relevant non-UK pension scheme which is referable to a member’s UK tax-relieved funds and secondly they modify the provisions of Part 4 of the Finance Act 2004 (“the Act”) in its application to relevant non-UK schemes.

Regulation 1 provides for the citation and commencement of the instrument and the interpretation of certain terms used in it.

Regulation 2 provides the method of computing the amount of a member’s UK tax-relieved fund under a relevant non-UK scheme.

Regulation 3 provides the method of computing the amount of a member’s relevant transfer fund under a relevant non-UK scheme.

Regulation 4 provides the rule for attributing payments out of a relevant non-UK scheme which are made to, or in respect of, a member to the member’s UK tax-relieved fund and the relevant transfer fund.

Regulation 5 introduces the modifications to the Part 4 of the Act.

Regulations 6 to 17 make the modifications. The purpose of the modifications is to ensure that the new regime for pensions which are subject to UK taxation set out in Part 4 of the Act works in the context of relevant non-UK schemes as defined in paragraph 1(5) of Schedule 34 to the Act.

Regulation 17 makes a modification to Schedule 34 by inserting a notional paragraph 19A. This provides the Inland Revenue with a discretionary power to mitigate, in relation to relevant non-UK schemes, the charges to tax which would otherwise arise under Part 4 of the Act, if it appears to them that any difference in the operation of the relevant non-UK scheme from that prescribed by Part of the Act is not material, and that it is appropriate to mitigate the effect of the strict rules.

A regulatory impact assessment in respect of the provisions of Part 4 of the Finance Act 2004 and subordinate legislation under it was published by the Board of Inland Revenue on 8 April 2004, and is available on the Inland Revenue website at www.inlandrevenue.gov.uk/ria/simplifying-pensions.pdf or obtained by writing to Inland Revenue, Capital & Savings Ministerial Correspondence Unit, 1st Floor, Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG2 1BB.

(1)

2004 c. 12. The functions of the Commissioners of Inland Revenue, including those under which this instrument is made, were transferred to the Commissioners for Her Majesty’s Revenue and Customs by section 5 of the Commissioners for Revenue and Customs Act 2005 (c. 11).

(2)

See, in relation to overseas schemes recognised for the purposes of Part 4, the Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2004.

(3)

As to the regulations referred to in that paragraph see Part 2 of this instrument.