Taxes Consolidation Act 1997 section 787RA

Credit for tax paid on an excess lump sum

Section 787RA provides that where income tax has been charged at the standard rate on an excess lump sum paid from a pension arrangement, and a chargeable excess also arises in relation to that individual, the pension scheme administrator must offset the lump sum tax against the chargeable excess tax.

• Where a benefit crystallisation event (BCE) occurring on or after 1 January 2011 gives rise to a chargeable excess, and standard rate income tax has been charged on an excess lump sum paid to the individual on or after that date, the chargeable excess tax is reduced by the amount of the lump sum tax.
• The lump sum tax that may be credited includes tax deducted by the same administrator (whether under the same or a different pension arrangement) or, where a certificate is obtained, tax deducted by a different administrator.
• Where the lump sum tax exceeds the chargeable excess tax, the unused balance (the tax balance) may be carried forward and used against chargeable excess tax arising on the next and subsequent BCEs until fully used up.
• Where a pension adjustment order (PAO) applies, a non-member spouse or civil partner who has paid excess lump sum tax may have it offset against their appropriate share of the chargeable excess tax.