Internal Transfers

General - Introduction

Internal transfers allow a member’s fund value to be re-allocated. Generally, a surrender or re-allocation of funds after April 2006 will lead to a tax charge as an unauthorised payment. However, reallocations can happen in some situations without tax charges e.g. where members surrender excess funds after April 2006 to allow enhanced protection to be obtained.

In some SSASs there may be unallocated general funds at April 2006 which need to be allocated.

Internal transfers do not go through the bank account and will not be treated as transfers for Revenue reporting purposes.

Internal transfers can also be used to allocate funds to a dependant on a member’s death.

Data Entry

The data screen can be accessed via the menu ‘Members, Internal Transfers’.

The member that the funds are being re-allocated from is selected from a drop-down list of members. Similarly, the member receiving the funds is selected from a list.

In each case, the ‘member’ can include a general fund, if a general fund has been set up (on the main Members screen).

Each internal transfer must be allocated to a member or a general fund – this cannot be left unknown.

If a member is surrendering funds and those funds are being allocated to 2 members on the same date, then the transfer needs to be recorded as 2 separate transfers with different recipients. Alternatively, the whole amount can be allocated to a general fund and then allocated as 2 internal transfers from the general fund to the receiving members. The use of a general fund is probably only worthwhile if part of the fund will be left unallocated for a period.

Arrangements/Sub-Funds

Protected Rights can be re-allocated to another member. If an amount is entered in the Protected Rights box, Omni will display a message saying ‘You have to enforce proportionality. Check that the protected rights amount that you enter is the correct proportion of the total amount.’

The ‘Fund From’ box allows you to enter the arrangement that the funds will be taken from. The choices shown are ‘Unvested’, ‘Normal Vested’, ‘Pre 2006’ and TiD1 etc to TiD5. You need to ensure that an arrangement exists and has sufficient for the internal transfer to take place.

The ‘Fund To’ box allows you to enter the arrangement that the funds will be credited to. If ‘Unvested’ is selected in the ‘Fund From’ box then the choices shown in the ‘Fund To’ box are ‘Unvested’ and ‘Normal Vested’. If anything else is selected in the ‘Fund From’ box, then the only option in the ‘Fund To’ box is ‘Normal Vested’.

A change that is part unvested and part vested has to be entered as 2 internal transfers.

You cannot record the removal of Protected Rights from a TiD fund because the fund split assumes that the proportion of protected rights in a TiD is fixed at the outset and always stays in the same proportion. If a TiD is selected in the FundFrom box, the Protected Rights field will be zeroed.

Delete

Transfers can be deleted using the ‘Delete’ button. This should be done with caution because the record will be permanently deleted and cannot be retrieved.

Fund Split Calculations

The amount of each internal transfer is shown as a negative amount for the surrendering member and a positive amount for the receiving member but the total transfer amount is always zero.

The internal transfer for each member receives investment return from the effective date of the transfer until the fund split date.

As always, transactions that occur on the date the fund value is being split are included in the calculations. Transactions that occurred on the date of the previous fund split are ignored because they should have been taken into account at the previous fund split date. In other words the fund is split at the end of the day.

Notes

These details are not intended to provide advice on the tax rules – professional advice should be obtained before proceeding.