Section 226A — Inheritance Tax Act 1984: Tax on notional pension property: withholding of benefits

Tax on notional pension property: withholding of benefits 226A 1 The personal representatives of a deceased person may give a notice to the scheme administrator of a registered pension scheme if they know that they are, or have reason to believe that they may be, liable for tax attributable to notional pension property of the deceased in relation to the scheme.

2 A prospective personal representative of a deceased person may give a notice to the scheme administrator of a registered pension scheme if they have reason to believe that, on becoming a personal representative, they would be, or might be, liable for tax attributable to notional pension property of the deceased in relation to the scheme.

3 In this section “ withholding notice ” means a notice under subsection (1) or (2).

4 While a withholding notice has effect, no benefit may be paid under the scheme to a person (“ P ”) if—

a the total amount of benefits previously paid under the scheme to P on the deceased’s death exceeds 50% of P’s benefit entitlement, or b the payment of the benefit would result in the total amount of benefits paid under the scheme to P on the deceased’s death exceeding 50% of P’s benefit entitlement.

5 In subsection (4) a person’s “ benefit entitlement ” means so much of the value of the notional pension property of the deceased in relation to the scheme as is attributable on a just and reasonable apportionment, having regard to appropriate actuarial assumptions, to benefits that have been paid, or are or will be payable, to that person.

6 Subsection (4) does not apply to the payment of an excluded benefit or an exempt benefit.

7 A withholding notice has effect from the time when it is received by the scheme administrator until the earliest of the following—

a any time when it is withdrawn by —

i the personal representatives, or ii if the person who gave the notice was a prospective personal representative, that person;

b any time when all the tax attributable to notional pension property of the deceased in relation to the scheme, and any interest due in respect of that tax, is paid;

c 15 months after the end of the month in which the deceased died.

8 A withholding notice does not have effect unless it complies with any requirements prescribed by the Commissioners for His Majesty's Revenue and Customs as to form and content.

9 The rules of a registered pension scheme are void so far as they purport to require a benefit to be paid in breach of subsection (4).

10 A payment that would fall due but for a withholding notice instead falls due immediately after the notice ceases to have effect.

11 For the consequences if a benefit is paid in breach of subsection (4), see section 210(3)(b) (joint liability of scheme administrator).

12 In this section— “ prospective personal representative ”, in relation to a deceased person, means a person who has reason to believe that they will become a personal representative of that person; “ registered club ” has the same meaning as in Chapter 9 of Part 13 of the Corporation Tax Act 2010.