Tax

Question 1

Do In-Specie contributions qualify for tex relief?

Answer 1

No, as do not qualify as contributions paid

Question 2

Tax rate and punishment for breaching MPAA and recycling tax free cash?

Answer 2

55% based on entire tax free cash amount not just funds recycled

Question 3

Conditions for full amount of tax free cash (25%) to be treated as unauthorised (3)

Answer 3

All 3 must be met:

• PCLS over £7.5k within 12 months
• contributions increased by 30%+ due to recycling
• recycling was pre planned

Question 4

Tax due for RPS on any investment?

Answer 4

None, unless for personal use e.g. art, holiday home, vintage wine, sports car, etc.

Question 5

Unauthorised payment taxation:

• unauthorised payments charge
• unauthorised payment surcharge
• scheme sanction charge
• de-registration charge

Answer 5

UPC - Flat 40% rate on property value

UPS - additional 15% rate on value if value is over 25% more than RPS value

SSC - RPS itself faces a charge of 15%-40%

DRC - RPS pays 40% tax on all scheme assets and is then de-registered

Question 6

Tax charge on QROPS/ROPS/within EEA or none of the above?

Answer 6

If resi. in same country as QROPS/ROPS or within EEA - not subject to tax and no LTA, everything subject to no tax

If not above then - 25% overseas tax charge

Question 7

What are tax rules if your a temporary non-resi. and take out QROPS/ROPS?

Answer 7

Classified as non-resi.:
- pre 5th April 2017 - Upto 5yrs
- post 6th April 2017 - Upto 10yrs

Withdrawal amount upto £100k:
- Not UK taxable

Withdrawal amount over £100k:
- Taxed in UK on return at marginal rate

Question 8

What must a person do if non-resi. and have a QROPS/ROPS?

Answer 8

Report to HMRC any payments that would not be allowed under UK registered pension scheme

Question 9

Tax rate if any pension paid to a trust or personal representative?

Answer 9

Entire payment on a rate of 45%

Question 10

How are dependent pensions taxed when member dies?

Answer 10

Taxes in full at recipients marginal rate as earned income

Question 11

What if transfer funds from UK DB pension to QROPS/ROPS? & non-QROPS/ROPS?

Answer 11

QROPS/ROPS:
- No tax

Non:
Payable by member:
- unauthorised payment charge - 40%
- unauthorised payment surcharge - 15%

Payable by scheme:
- scheme sanction charge - 15%

Question 12

Transfers from abroad to UK tax rules:

• Received from recognised pension
• Received from non-recognised pension

Answer 12

Recognised pension:
- No tax paid & LTA enhancement given to member

Unrecognised pension:
- No tax paid but no enhancement either

Question 13

Taxation rules of guarantee period pension protection income received?

Answer 13

Treat as taxable earned income

Question 14

Tax rules for nominee, dependent & successor

Answer 14

Under age 75 on death - No tax

Age 75+ on death - Taxable on recipients marginal rate

Question 15

Mortality gain

Mortality drag

Answer 15

Gain - Every annuitant will be given a slightly higher annuity rate

Drag - amount of growth needed to compensate for mortality gain

Question 16

How are QROPS or ROPS treated for tax?

Answer 16

If within same country as pension scheme based then no overseas tax charge otherwise flat rate of 25%

Only taxable in 1 country if abides by double taxation agreement

No tax above LTA

Must report to HMRC any charges that would not be allowed under a UK RPS

40% tax charge and 15% surcharge if tax rules are broken

Question 17

Tax rules for receiving pension due to serious ill health

Answer 17

-if suffer serious ill health pre age 75 - usual tax rules apply

Or

If suffer serious I’ll health age 75+ - all lump sum paid taxable at marginal rate

Question 18

How are small pots funds taxable when refunded to member?

Answer 18

25% tax free

Question 19

What tax is charged on a deferred state pension?

Answer 19

Fixed at whatever marginal rate is, so if state pension takes income into new tax bracket still use original tax bracket.

Question 20

Tax bands if have pension refunded?

Answer 20

20% - First £20k

50% - Over £20k

Question 21

Tax rules for a scheme pension

Answer 21

Age does not matter. Recipient will be taxed at marginal rate

Question 22

Which 3 schemes have different tax rules and are fully taxable at marginal rate? Which 2 schemes are an odd ball and has different rules?

Answer 22

Dependent pension

Scheme pension

Guarantee period pension

Odd balls:

Deferred state pension - taxable in full at marginal rate already in and cannot increase

Small pension pot when refunded - tax relief of 25% less than marginal rate