Tax charge on unauthorised payment

When she was in her mid 40s the taxpayer decided to transfer part of her civil service pension scheme fund to a self-invested personal pension (SIPP) administered by Optimum. The SIPP then invested the sum in KJK Investments Ltd. It lent the money to G Loans which in turn loaned £26 800 (gross) to the taxpayer.

HMRC said the loan was an unauthorised payment and imposed an unauthorised payment charge at 40% together with an unauthorised payment surcharge of 15% on the loan (FA 2004 s 208 and s 209). In 2015 KJK Investments and G Loans were wound up.

The taxpayer appealed against the surcharge.

The First-tier Tribunal had ‘some sympathy’ with the taxpayer saying it was not known how much of her original payment into the scheme was recovered after the companies were wound up. However the judge said the taxpayer ‘must have realised that entering...