Taxes Consolidation Act 1997 section 787Q

Chargeable excess

Section 787Q defines the concept of a chargeable excess, sets out when such an excess arises, and provides rules for the recovery of chargeable excess tax by pension scheme administrators, including special provisions for public sector schemes and situations involving pension adjustment orders.

• A chargeable excess arises where the capital value of a benefit crystallisation event exceeds the individual's available standard fund threshold or personal fund threshold, or where none of the threshold remains available.
• Where an administrator pays the tax on a chargeable excess without recovering it from the individual, the tax paid is itself treated as part of the chargeable excess, requiring a grossing-up calculation to arrive at the correct liability.
• Where a pension adjustment order applies, both the member and the non-member share the chargeable excess tax pro rata to their respective shares of the retirement benefit, and administrators may dispose of scheme assets to recover the non-member's share.
• Public sector administrators may recover chargeable excess tax through appropriation from the net lump sum, reduction of the gross pension over up to 20 years, direct payment by the individual, or a combination of these methods.