CG67650 - Pension Schemes: disposal of an asset

Section 271 provides for the disposal of assets held by certain types of pension scheme to be exempt from capital gains tax.

A gain accruing on the disposal of an asset by a type of pension scheme not listed below is chargeable to capital gains tax.

Registered pension schemes

Section 271(1A) Taxation of Chargeable Gains Act 1992

The disposal of an investment held for the purposes of a registered pension scheme is not a chargeable gain. It is therefore exempt from capital gains tax.

A registered pension scheme is a pension scheme that is registered under Chapter 2 of Part 4 of the Finance Act 2004 because either:

  • an application to be registered has been made and the scheme has been registered by HMRC, or
  • the scheme is treated as automatically registered (see PTM0313000)

To find out whether a pension scheme is registered HMRC colleagues can contact Pension Schemes Services on 0300 1231079.

Note that this exemption does not prevent the scheme sanction charge arising due to a gain on the disposal of ‘taxable property’ by an ‘investment-regulated pension scheme’ (see PTM125300 and PTM125400).

Overseas pension schemes

Section 271(1A) Taxation of Chargeable Gains Act 1992

Section 150(7) Finance Act 2004

Regulation 2 The Pension Schemes (Categories of Country and Requirements for Overseas Pension Schemes and Recognised Overseas Pension Schemes) Regulations 2006 – SI 2006/206

With effect from 6 April 2013 the disposal of an investment held for the purposes of an overseas pension scheme is not a chargeable gain. It is therefore exempt from capital gains tax.

The term ‘overseas pension scheme’ has a specific meaning. It is not simply a pension scheme set up outside the UK. An overseas pension scheme is a non-UK pension scheme, which is not a registered pension scheme, that satisfies certain conditions specified by legislation. Broadly these are schemes are an overseas equivalent of registered pension schemes. Note that the conditions a scheme must satisfy are factual ones; this is not a status granted by HMRC.

PTM112200 provides guidance on the meaning of the term ‘overseas pension scheme’, and the conditions a pension scheme must satisfy to be an overseas pension scheme.

Section 615 schemes

Section 271(1)(c)(ii) Taxation of Chargeable Gains Act 1992

Section 615 Income & Corporation Taxes Act 1988

Any gain accruing on the disposal of an asset held by a ‘section 615 scheme’ is exempt to the extent that it relates to the ‘pre 2017’ funds.

A section 615 scheme is one to which section 615(3) Income & Corporation Taxes Act 1988 (ICTA 1988) applies. Section 615(6) ICTA 1988 defines the type of scheme to which section 615(3) applies. These schemes provide superannuation benefits in respect of an employment wholly carried out abroad. A section 615 scheme cannot be set up after 5 April 2017.

Where benefits accrue under the scheme after 5 April 2017, section 615 treats those benefits as made under a separate superannuation fund (a shadow fund). Section 615(11)(c) provides that any reference to a scheme to which section 615(3) applies does not include this post 2017 ‘shadow fund’. For this reason the exemption from capital gains tax applies only to assets held under the arrangement relating to benefits accrued before 6 April 2017.

Other types of pension scheme or funds

Taxation of Chargeable Gains Act 1992

Section 271(1)(b) and (c)

Any gain accruing on the disposal of an asset held by one of the following types of fund is also exempt:

  • The House of Commons Members’ Fund
  • Certain Indian Family Pension Funds
  • Pension funds established in the United Kingdom by Commonwealth governments
  • The Overseas Superannuation Scheme
  • The Central African Pension Fund
  • The Overseas Service Pension Fund