Part 2Unauthorised payments
Chapter 2Top-up payments and excess amounts
Top-up payments: deduction from payment
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—
“the gross-up amount” is an amount equal to five thirds of the difference between—
the amount of the top-up payment that was paid to the individual, and
the amount that would have been paid to the member if a tax deduction had been made;
“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.