Read carefully

Charge on unauthorised pension payment

The taxpayer retired from the civil service and took his pension from 1996. In 2013 he received a lump sum refund of the widows and orphans contributions. Although the pension scheme administrator advised that the payment should be reported to HMRC the taxpayer failed to include it in his return. HMRC opened an enquiry and assessed the sum to tax at 40%. The taxpayer appealed.

The First-tier Tribunal noted that the taxpayer accepted the refund was an unauthorised payment under FA 2004 s 166. But he said it should have been made clear to him by the pension scheme administrator that had he taken the refund as part of his regular pension payments the tax charge would have been avoided. The tribunal said the letter giving him the options for taking the refund had stated this. The taxpayer had decided...