CRA applies constructive receipt doctrine to direct payment from one UK pension plan to another

After a UK resident (under age 55) became resident in Canada, the commuted value of the individual’s member benefits under a UK defined-benefit pension plan was transferred directly to a UK self-invested personal pension plan (SIPP) of which the individual was the sole beneficiary.

In finding that such commuted value was to be included at the time of the transfer in the individual’s income pursuant to s. 56(1)(a)(i), CRA stated that “the Individual is considered to have constructively received the benefit on the basis that, by virtue of the Transfer, the benefit has been set apart for the Individual” - and found, in the alternative, that s. 56(2) would apply to include the commuted value in the individual’s income on the basis that the individual had directed or concurred in the payment of an amount to a third party (the UK SIPP) and that amount, had it been paid to the individual, would have been included under s. 56(1)(a)(i). This would also mean that the individual had made a “contribution” to the UK SIPP plan.

Neal Armstrong. Summary of 7 November 2022 External T.I. 2022-0926091E5 under s. 56(1)(a)(i).