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Where the payment is made to or for an employer participating in an occupational pension scheme it's the employer who's subject to the unauthorised payments tax charge.

The rate of the unauthorised payments charge is 40%.

Very often these firms say there is a legal loophole they can use so you don't pay tax.

There is no legal loophole and these transactions are unauthorised payments.

HMRC were asked to consider the following examples: HMRC response “In simple terms the IIP trust income is mandated to the beneficiary when the beneficiary will receive that income directly from the source.

So, any scenario where the trust income does not go via the trustees’ bank account, but straight to the beneficiary’s is one within TSEM 3763.

More on pension liberation schemes in the link below: Pension liberation - the cost of accessing or unlocking your pension early Top Unauthorised payments are subject to the following tax charges: Where the unauthorised payment is made to or for a member, it's the member who's responsible for paying the tax charge - even if they didn't receive the payment.

If the payment is made after the member's death the person who receives the payment is responsible for paying the tax.

So in such a case there is no statutory basis (see TSEM3761) for taxing the trustees as being in receipt of the income.I have heard that there is a proposal to stop the mandating of income to IIP beneficiaries for tax purposes.Apparently mandated income is going to be ignored and all income will need to be reported and taxed via the Trust Tax Return.There may also be an issue, in that the dividend income may not be treated as such when paid to the beneficiary for the purpose of the new personal savings allowance.Simon Northcott In the good old days when clients had a large portfolio it was customary for my client trustees to choose one asset (eg a large holding of a particular government stock) and mandate that to the solicitors (or the trustees, I suppose).Essentially this is an administrative shortcut - the tax paid remains the same; but there is a time and costs saving for both the trustees and HMRC.TSEM3763 states: “Sometimes the trustees mandate trust income to a beneficiary.The examples given in your question are all within the TSEM 3763, except numbers 5 and 6 where the trustees receive the income directly from the source, they are therefore taxable as being in receipt of the income.They therefore include this on the Trust and Estate tax return (SA900).As a condition of getting tax relief the government want pension schemes to use their funds to provide certain benefits, such as a pension for life.The tax rules define these benefits as authorised payments.

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