Part 2Unauthorised payments

Chapter 1Interpretation

Interpretation of Part 2

regulation 2 + 2.—(1) In this Part—

term chapter 1 scheme + “Chapter 1 scheme” and “Chapter 1 legacy scheme” have the same meanings as in Chapter 1 of Part 1 of PSPJOA 2022(1);

term event report + “event report” means a report required by regulation 3(1) of the Registered Pension Schemes (Provision of Information) Regulations 2006 (provision of information by scheme administrator to the Commissioners)(2);

term hmrc + “HMRC” means His Majesty’s Revenue and Customs;

term offset + “offset” means offset in accordance with regulation 7(2) or (3);

term reclaimed + “reclaimed” means reclaimed in accordance with regulation 7(4);

term relevant charge + “relevant charge” means—

term relevant period + “relevant period” means a period of three months ending with 31st March, 30th June, 30th September or 31st December;

term relevant rectification provision + “relevant rectification provision” means—

term repayment interest + “repayment interest” means interest calculated in accordance with regulation 8;

term return + “return” means a return under regulation 9.

(2) Expressions used in this Part, unless otherwise provided, have the same meaning as in Part 4 of FA 2004 (pension schemes etc)(6).

Meaning of “historic payment”, “top-up payment” and “interest payment”

regulation 3 + 3.—(1) In this Part “historic payment”, “top-up payment” and “interest payment” have the following meanings.

term historic payment + (2) “Historic payment” means a payment of a lump sum under a Chapter 1 legacy scheme to an individual with remediable service(7) where—

regulation 3 2 a + (a)an amount of the payment was an unauthorised member payment(8),

regulation 3 2 b + (b)the scheme administrator paid the resulting unauthorised payments charge on behalf of the individual, and

regulation 3 2 c + (c)as a result of a relevant rectification provision, the amount of the payment that was an unauthorised member payment has reduced.

term top up payment + (3) “Top-up payment” means an unauthorised member payment made under a Chapter 1 scheme on or after 1st October 2023 that is—

regulation 3 3 a + (a)made, as a result of a relevant rectification provision, in respect of the same individual and for the same reason as a historic payment, or

regulation 3 3 b + (b)an interest payment.

term interest payment + (4) “Interest payment” means a payment of interest, in respect of an amount within paragraph (3)(a), which is payable by virtue of scheme regulations made under section 26 of PSPJOA 2022 in accordance with—

regulation 3 4 a + (a)direction 14(5) and (6) of the Public Service Pensions (Exercise of Powers, Compensation and Information) Directions 2022(9), or

regulation 3 4 b + (b)direction 14(5) and (6) of the Public Service Pensions (Exercise of Powers, Compensation and Information) Directions (Northern Ireland) 2023(10).

Meaning of “excess amount”, “excess individual amount” and “excess scheme amount”

regulation 4 + 4.—(1) In this Part “excess amount”, “excess individual amount” and “excess scheme amount” have the following meanings.

(2) An “excess amount” is the amount by which the amount paid to HMRC by a scheme administrator in respect of a relevant charge that arose on the making of a historic payment exceeds, as a result of a relevant rectification provision, the amount of the liability for the relevant charge.

(3) An excess amount is an “excess individual amount” if the relevant charge was an unauthorised payments charge that was paid by the scheme administrator on behalf of an individual.

(4) An excess amount is an “excess scheme amount” if the relevant charge was a scheme sanction charge.

Chapter 2Top-up payments and excess amounts

Top-up payments

regulation 5 + 5.—(1) Section 208 of FA 2004 (unauthorised payments charge) has effect, in relation to a top-up payment, as if—

regulation 5 1 a + (a)in subsection (2) for “person” there were substituted “persons”;

regulation 5 1 b + (b)in subsection (2)(a) for “is the person” there were substituted “are the person and the scheme administrator”;

regulation 5 1 c + (c)in subsection (2)(b) for “is the recipient” there were substituted “are the recipient and the scheme administrator”.

(2) Section 240 of FA 2004 (scheme sanction charge: amount of charge) has effect, in relation to a top-up payment, as if—

regulation 5 2 a + (a)in subsection (1) “40%” were replaced with “15%”;

regulation 5 2 b + (b)subsections (2) to (4) were omitted.

(3) Section 241 of FA 2004 (scheme sanction charge: scheme chargeable payment) has effect as if an interest payment were specified in subsection (2) as an unauthorised payment that is exempt from being scheme chargeable.

Top-up payments: deduction from payment

regulation 6 + 6.—(1) A scheme administrator who makes a top-up payment to an individual must make a tax deduction from it.

(2) The making of a tax deduction does not affect the amount of the top-up payment that is an unauthorised member payment.

(3) If a tax deduction is not made before a top-up payment is paid to the individual then, for the purpose of calculating the amount of the unauthorised member payment, the gross-up amount is to be added to the amount of the top-up payment.

(4) Where a top-up payment was made before these Regulations came into force, this regulation has effect as if the tax deduction was required to be made from benefits paid to the individual under the Chapter 1 scheme before the scheme administrator makes a return in respect of the payment.

(5) In this regulation—

term the gross up amount + “the gross-up amount” is an amount equal to five thirds of the difference between—

term tax deduction + “tax deduction” means the deduction of an amount equal to the result of the individual calculation in paragraph 8 of the Schedule in respect of the top-up payment.

Excess amounts

regulation 7 + 7.—(1) A scheme administrator is entitled to recover an excess amount from HMRC if—

regulation 7 1 a + (a)it can be offset under paragraphs (2) or (3) or reclaimed under paragraph (4), and

regulation 7 1 b + (b)the scheme administrator includes it in a return in accordance with paragraph (5).

(2) An excess individual amount can be offset against an unauthorised payments charge that arises on a top-up payment in relation to the same individual, to the extent that it does not exceed that charge.

(3) An excess scheme amount can be offset against a scheme sanction charge that arises on a top-up payment in relation to the same individual, to the extent that it does not exceed that charge.

(4) An excess amount can be reclaimed if it relates to the making of a historic payment on or after 6th April 2019.

(5) An excess amount can only be included in a return if—

regulation 7 5 a + (a)the return is made on or before 31st January 2031, and

regulation 7 5 b + (b)either—

regulation 7 5 b i + (i)the return includes a top-up payment that relates to the same individual, or

regulation 7 5 b ii + (ii)the excess amount is being reclaimed and the condition in paragraph (6) is met.

(6) The condition is that either—

regulation 7 6 a + (a)the scheme administrator has not made a top-up payment that relates to the same individual and does not reasonably expect to do so, or

regulation 7 6 b + (b)it was not reasonably practicable for the excess amount to be included in the same return as a top-up payment that relates to the same individual.

(7) An excess amount may not be recovered by any other person or in any other way, save that a scheme administrator may make an application under regulation 20 of the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No. 2) Regulations 2023 (application required by schemes to reclaim overpayment of scheme sanction charge resulting from rectification) in respect of an excess amount that cannot be recovered under these Regulations.

(8) Section 42 of, and Schedule 1AB to, TMA 1970 (procedure for making claims to recover overpaid tax)(11) do not apply in relation to an excess amount.

Excess amounts: repayment interest

regulation 8 + 8.—(1) A scheme administrator is entitled to repayment interest if an excess amount that can be reclaimed is recovered in accordance with regulation 7.

(2) If an excess amount cannot be reclaimed, a scheme administrator is only entitled to repayment interest when an excess amount is recovered in accordance with regulation 7 to the extent that it does not exceed the remaining amount of the relevant charge, after any excess amounts have been offset against it.

(3) If a top-up payment has been made in respect of an individual, a scheme administrator is only entitled to repayment interest if it is included it in a return relating to the excess amount.

(4) Repayment interest on an excess amount is to be calculated by applying the prescribed rate to the excess amount for the period—

regulation 8 4 a + (a)beginning with the later of—

regulation 8 4 a i + (i)the 31st January following the tax year in which the historic payment was made, and

regulation 8 4 a ii + (ii)the day on which the relevant charge in respect of the historic payment was paid to HMRC, and

regulation 8 4 b + (b)ending with the later of—

regulation 8 4 b i + (i)the day on which a top-up payment is made under the Chapter 1 scheme in respect of the same individual, and

regulation 8 4 b ii + (ii)where an excess amount is reclaimed, the day on which HMRC makes a payment in respect of that amount to the scheme administrator.

(5) A person is not entitled to interest, or an amount equivalent to interest, in respect of the recovery of an excess amount otherwise than in accordance with this regulation.

term the prescribed rate + (6) In this regulation “the prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 (setting of rates of interest)(12) for the purposes of section 824 of the Income and Corporation Taxes Act 1988(13).

Chapter 3Administration

Returns

regulation 9 + 9.—(1) A scheme administrator—

regulation 9 1 a + (a)must make a return to HMRC in respect of a top-up payment, and

regulation 9 1 b + (b)may make a return to HMRC in respect of any excess amount.

(2) A return must—

regulation 9 2 a + (a)contain the information prescribed in the Schedule,

regulation 9 2 b + (b)relate to all top-up payments made in a relevant period, and

regulation 9 2 c + (c)be made before the end of the period of 45 days beginning with the day immediately following the end of the relevant period.

(3) Where a scheme administrator made a top-up payment before the coming into force of these Regulations, this regulation applies as if that payment was made on the day after these Regulations come into force.

Assessment

regulation 10 + 10.—(1) An officer of HMRC may make an assessment to—

regulation 10 1 a + (a)the unauthorised payments charge, and

regulation 10 1 b + (b)the scheme sanction charge,

in the amounts that should, in the officer’s opinion, be charged on a person who is liable to such a charge in connection with a top-up payment.

(2) An assessment on a scheme administrator may relate to—

regulation 10 2 a + (a)more than one top-up payment, and

regulation 10 2 b + (b)more than one individual.

(3) Where a return has been made in respect of a top-up payment, an assessment under paragraph (1) may be made at any time on or before—

regulation 10 3 a + (a)the date six years after the day on which the return was made, if the scheme administrator has carelessly caused the return to be inaccurate in a material respect,

regulation 10 3 b + (b)the date 20 years after the day on which the return was made, if the scheme administrator has deliberately caused the return to be inaccurate in a material respect, or

regulation 10 3 c + (c)in any other case, the date four years after the day on which the return was made.

(4) If a return has not been made in respect of a top-up payment, an assessment under paragraph (1) may be made at any time on or before the date 20 years after the last day on which such a return could have been made.

(5) In this regulation—

regulation 10 5 a + (a)section 118(5) to (7) of TMA 1970 (interpretation: bringing about a situation carelessly or deliberately)(14) applies for the purposes of determining whether a scheme administrator carelessly or deliberately caused a return to be inaccurate in a material respect, and

regulation 10 5 b + (b)references to circumstances brought about by a scheme administrator include circumstances brought about by another person acting on behalf of that scheme administrator.

Repayment

regulation 11 + 11.—(1) An excess amount or an amount of repayment interest included in a return must be paid to a scheme administrator unless, within the specified period, an officer of HMRC notifies the scheme administrator that, in the officer’s opinion, the amount—

regulation 11 1 a + (a)is not properly recoverable by the scheme administrator, or

regulation 11 1 b + (b)is properly recoverable in a lesser amount.

term the specified period + (2) In paragraph (1) “the specified period” means the period of 90 days beginning with the date on which the return was received by HMRC.

(3) An appeal may be brought against a notification under paragraph (1) as if it were a conclusion stated in a closure notice under paragraph 7 of Schedule 1A to TMA 1970 (completion of enquiry into claim)(15).

Recovery of overpayments

regulation 12 + 12.—(1) Where an officer of HMRC considers that an amount was not properly recoverable as an excess amount, either wholly or partially, that amount may be assessed and recovered under this regulation as if it were unpaid tax.

(2) An assessment under this regulation must be made on or before the date four years after the day on which a return was made in respect of the excess amount.

Power to withdraw assessments

regulation 13 + 13.—(1) HMRC may withdraw an assessment under regulation 10 or 12, or a notification under regulation 11, by notice to the person to which it relates.

(2) An assessment or notification that has been withdrawn under this regulation ceases to have effect and is to be taken as never having had any effect.

Obligations under other enactments

regulation 14 + 14.—(1) An individual is not obliged to comply with an obligation under Part 2 of TMA 1970 (returns of income and gains) in respect of a top-up payment.

(2) A scheme administrator is not, in respect of a matter dealt with in a return, obliged to make or amend—

regulation 14 2 a + (a)an event report, or

regulation 14 2 b + (b)a return under section 254 of FA 2004 (accounting for tax by scheme administrators).

(3) Where, before the coming into force of these Regulations, an assessment was made by virtue of—

regulation 14 3 a + (a)section 9 (returns to include self-assessment) or 29 (assessment where loss of tax discovered) of TMA 1970, or

regulation 14 3 b + (b)regulation 4 of the Registered Pension Schemes (Accounting and Assessment) Regulations 2005 (the making of assessments)(16),

that assessment is to be treated as not including, and never having included, an amount in respect of a top-up payment.

Interest and penalties

regulation 15 + 15.—(1) Sections 101 (late payment interest on sums due to HMRC) and 103 (rates of interest) of the Finance Act 2009 apply in relation to an amount of income tax which is assessed and recoverable by virtue of an assessment under regulation 10 or 12 as if it were an assessment under section 29 of TMA 1970.

(2) Schedule 55 to the Finance Act 2009 (penalty for failure to make returns) applies in relation to a failure to make a return required by regulation 9(1)(a) on or before the date in regulation 9(2)(c) as if it were a failure to make or deliver a return under section 254 of FA 2004 on or before the filing date.

(3) Schedule 24 to the Finance Act 2007 (penalties for errors)(17) applies to a return as if it were a return under section 254 of FA 2004.

Electronic communications

regulation 16 + 16.—(1) The Registered Pension Schemes and Overseas Pension Schemes (Electronic Communication of Returns and Information) Regulations 2006(18) apply as if—

regulation 16 1 a + (a)a return,

regulation 16 1 b + (b)an assessment under regulation 10 or 12, or

regulation 16 1 c + (c)a notification under regulation 11(1),

were information specified in Schedule 2 to those Regulations.

(2) The Income and Corporation Taxes (Electronic Communications) Regulations 2003(19) apply to a payment made by HMRC in connection with the operation of these Regulations as if it were a payment made in connection with the operation of Schedule 1A to TMA 1970.

Split schemes

regulation 17 + 17.—(1) The Registered Pension Schemes (Splitting of Schemes) Regulations 2006(20) have effect as if, in Part 2 of Schedule 3, at the end there were inserted—

“The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023

The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No. 2) Regulations 2023

The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2025”.

(2) The amendment made by paragraph (1) does not impose any liability on a sub-scheme administrator for any act or omission that took place before the coming into force of these Regulations.

term sub scheme administrator + (3) In this regulation “sub-scheme administrator” has the meaning given in regulation 1(2) of the Registered Pension Schemes (Splitting of Schemes) Regulations 2006.

Amendment of the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No. 2) Regulations 2023

regulation 18 + 18.—(1) Regulation 20 of the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No. 2) Regulations 2023 (application required by schemes to reclaim overpayment of scheme sanction charge resulting from rectification) is amended as follows—

regulation 18 1 a + (a)in paragraph (1) omit the “and” after sub-paragraph (b);

regulation 18 1 b + (b)in paragraph (1) after sub-paragraph (c) insert “, and

“(d)the amount cannot be recovered from HMRC as an excess amount in accordance with regulation 7 of the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2025.”;

regulation 18 1 c + (c)in paragraph (7) for “1st April 2027” substitute “31st January 2031”;

regulation 18 1 d + (d)in paragraph (8)(a) after paragraph (i) insert—

“(ia)a declaration that the claimed amounts cannot be recovered from HMRC in accordance with regulation 7 of the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2025,”.

(2) The amendments made by paragraph (1) do not have effect in relation to an application that was made, under regulation 20 of the Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) (No. 2) Regulations 2023, before the coming into force of these Regulations.