In Peter Browne v HMRC [2016] TC05331 a careless delay in transferring funds between pension plans led to an unauthorised payment charge for the taxpayer.

Payments which a registered pension scheme is allowed to make to or on behalf of a member are set out in s160 and s164 FA 2004.  These include a ‘recognised transfer’ of funds or assets between registered pension schemes.

Any other payment is an ‘unauthorised payment’ liable to an unauthorised payment charge for the member of 40%, plus a potential further unauthorised payment surcharge of 15%.

  • The taxpayer had worked as an Independent Financial Advisor (IFA) for many years and built up two pension funds.
  • In 2010 he decided to move both to a Self Invested Pension Plan (SIPP) operated by his then employer.
  • He received cheques for the sums in his old funds but, as the SIPP paperwork was not ready, cashed them into his own bank account in the meantime.
  • The taxpayer was subsequently dismissed by his employer.  Due to this and other difficulties it was 3 years before he finally transferred the funds to a SIPP.

The First Tier Tribunal (FTT) found that:

  • The cheques received by the taxpayer from his old pensions were unauthorised payments: the definition of a ‘recognised transfer’ does not allow for an intermediate stage where funds are held by someone other than a registered pension scheme.
  • The payments were therefore subject to the unauthorised payment charge of 40%.
  • The unauthorised payment surcharge of 15% should be quashed: it was not just and reasonable as the taxpayer had always intended to transfer the funds to a new SIPP and his errors were merely foolish.
  • HMRC’s discovery assessment was valid as the taxpayer’s omission of an unauthorised payment charge from his tax return was careless.

The FTT left it to the parties to consider whether, given that the payments eventually made to the SIPP by the taxpayer were not a recognised transfer, tax relief was available as on a new contribution.


Our subscriber guides:

Pensions: tax rules and planning

Pensions: unauthorised payment charges

Case reference: Peter Browne v HMRC [2016] TC05331