UT (Tax & Chancery) UT/2023/000103 - [2025] UKUT 00102 (TCC)

Employers who receive an unauthorised employer payment are liable to unauthorised payments charges and surcharges. The provisions relating to the former are set out at s 208, which reads:

“(1)

A charge to income tax, to be known as the unauthorised payments charge, arises where an unauthorised payment is made by a registered pension scheme.

(2)

The person liable to the charge

(a)-b)…

(c)   in the case of an unauthorised employer payment, is the person to or in respect of whom the payment is made.

(3)

If more than one person is liable to the unauthorised payments charge in respect of an unauthorised payment, those persons are jointly and severally liable to the charge in respect of the payment.

(4)

…

(5)

The rate of the charge is 40% in respect of the unauthorised payment.

(6)

…

(7)

An unauthorised payment may also be subject to

(a)

the unauthorised payments surcharge under section 209, and

(b)

the scheme sanction charge under section 239.”

Section 209 sets out the unauthorised payments surcharge; it reads:

“(1)

A charge to income tax, to be known as the unauthorised payments surcharge, arises where a surchargeable unauthorised payment is made by a registered pension scheme.

(2)

"Surchargeable unauthorised payments" means

(a)

…

(b)

surchargeable unauthorised employer payments (see section 213).

(3)

The person liable to the charge

(a)-(b)…

(c)

in the case of a surchargeable unauthorised employer payment, is the person to or in respect of whom the payment was made.

(4)-(5)…

(6)

The rate of the charge is 15% in respect of the surchargeable unauthorised payment.”

Section 239 provides for related scheme sanction charges to be levied on the scheme administrator. It reads:

“(1)

A charge to income tax, to be known as the scheme sanction charge, arises where in any tax year one or more scheme chargeable payments are made by a registered pension scheme.

(2)

The person liable to the scheme sanction charge is the scheme administrator.”

Section 240(1) provides that the amount of the scheme sanction charge is “40% in respect of the scheme chargeable payment, or the aggregate of the scheme chargeable payments, made by the pension scheme in the tax year”. Section 241(1) provides that a “scheme chargeable payment” includes “an unauthorised payment by the pension scheme, other than one which is exempt from being scheme chargeable”.