Section 206A | Partial repayment of section 206 charge where IHT paid by recipient of benefit

(1)This section applies where—

(a)a registered pension scheme pays a lump sum death benefit in respect of a deceased member to a non-qualifying person,

(b)a liability to the lump sum death benefits charge arises in respect of the lump sum death benefit,

(c)at any time (whether before or after the payment of the lump sum death benefit)—

(i)the non-qualifying person pays an amount of inheritance tax that is attributable to the value of the deceased’s notional pension property, or

(ii)the deceased’s personal representatives pay an amount of inheritance tax that is so attributable and pass on the burden of that payment to the non-qualifying person, and

(d)the non-qualifying person makes an application under this section for a reduction in the lump sum death benefits charge.

(2)Section 206 applies in relation to the lump sum death benefit as if the amount of the benefit that was paid to the non-qualifying person were the amount in fact paid, reduced by the amount of inheritance tax paid as mentioned in subsection (1)(c).

(3)If and to the extent that the amount of the lump sum death benefits charge paid in respect of the lump sum death benefit exceeds the amount of the liability (as recalculated as a result of subsection (2)), the excess must be repaid to the non-qualifying person (and may not be repaid to the scheme administrator).

(4)An application under this section is of no effect unless it complies with such requirements as to timing, form and content as may be prescribed by the Commissioners.

(5)For the purposes of subsection (1)(c) the deceased’s personal representatives “pass on the burden” of a payment of inheritance tax to the non-qualifying person if—

(a)the personal representatives pay a sum to the non-qualifying person out of the deceased’s estate that has been reduced by the amount of inheritance tax, or

(b)the non-qualifying person reimburses the personal representatives that amount.

(6)In this section—

“the Commissioners” means the Commissioners for His Majesty’s Revenue and Customs;

“inheritance tax” includes interest on inheritance tax;

“non-qualifying person” has the same meaning as in section 206.