Employer refund

B

boaber

Registered User
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In a case where only the Employer has made contributions to a members scheme, and the member has now left service with less than 2 years service (vesting perios is 2 years on the scheme), am I right in saying that the only option is to refund the full surrender value back to the Employer. This is then treated as a Trading Receipt.

The Employer involved wants to know if they can surrender this members policy and use this SV as a Single Premium top up to another members policy in the same scheme.

I am of the opinion that the refund should go 'through their books', and so a simple transfer of the SV into the other members policy would not be allowed?

What do ye think?
 
I don't think so. Couldn't the employee decide to leave the funds paid up in the scheme or transfer to another employer's scheme or a buy out bond depending on the vesting rules of the scheme? I've been in schemes before where even after less than two years membership I was able to retain benefits.
 
  • The company does not have to take a refund
  • It could leave the person keep the money - as pension money of course - even though less than 2 years in the pension plan
  • Could also give the money to another member's pension fund - as long as it remains as pension money
  • Of course, the company might want the money back
 
If the scheme has a vesting period of, say, 1 year, and the employee leaves after 1.5 years, then the employee would be entitled to a transfer value of the Employer contributions.

In other cases, the trustees have the discretion to give the employee the benefit of the Employer Surrender Value even if they had no vested rights.

That's not the case here, the Employer wants to give another member of the scheme the SV as a Single Premium top up
 
boaber said:
That's not the case here, the Employer wants to give another member of the scheme the SV as a Single Premium top up
Click to expand...

Can he do this without incurring any tax liability?

S.782, TCA 1997 states the following:


[FONT=verdana,arial,helvetica]782.—(1) Where any payment is made or becomes due to an employer out of funds which are or have been held for the purposes of a scheme which is or has at any time been an exempt approved scheme, then—[/FONT]
[FONT=verdana,arial,helvetica](a) if the scheme relates to a trade or profession carried on by the employer, the payment shall be treated for the purposes of the Tax Acts as a receipt of that trade or profession receivable when the payment is due or on the last day on which the trade or profession is carried on by the employer, whichever is the earlier;[/FONT]​

[FONT=verdana,arial,helvetica](b) if the scheme does not relate to such a trade or profession, the employer shall be charged to tax on the amount of the payment under Case IV of Schedule D, but only in proportion to the extent that the payment represents contributions by the employer under the scheme which were allowable as deductions for tax purposes.[/FONT]​
[FONT=verdana,arial,helvetica](2) This section shall not apply to a payment which was due before the scheme became an exempt approved scheme.[/FONT]
[FONT=verdana,arial,helvetica](3) References in this section to any payment include references to any transfer of assets or other transfer of money's worth.[/FONT]

Paragraph (3) seems to suggest that a transfer of a surrender value to another members policy would be subject to tax?
 
To me that looks like a reference to a transfer of the assets into company's own name - if it remains as pension money then I would imagine that there is no tax.

Another way to look at it I guess would be to transfer it back to company - pay tax - then pay it back to company pension scheme for the other person and claim tax relief on that pension contribution, surely that will have an overall ZERO TAX impact anyway.
 

Thanks for that. Receive more clarification....as long as the monies are staying within the scheme then there would be no tax implications.

You were right in saying that the tax in and out would cancel each other out.
 
That is fine, sounds like there should be no problem doing it either way so.
 
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