Guidance

Pension schemes newsletter 86 – April 2017

Published 21 April 2017

1. In specie contributions to registered pension schemes

Over the past six months HM Revenue and Customs (HMRC) has received a number of requests to clarify our technical understanding of the contribution of assets to registered pension schemes. This method has become known as making an in specie contribution. This article summarises HMRC’s view on the legislation and the guidance provided at PTM042100 in the Pensions Tax Manual (PTM).

1.1 HMRC’s position

Recent speculation is that we have changed our position on in specie contributions. This is not the case. For clarity, our position is as follows:

• it is, and has always been, our view that the only contributions on which tax relief can be claimed under sections 188 or 196 of Finance Act 2004 are those made in cash. Where any other type of asset is acceptable, this is specifically provided for in the legislation. Examples of this are sections 195 and 196B to 196L of Finance Act 2004

• it is possible under contract law to give effect to a pre-existing obligation to make a cash contribution with the transfer of an asset or assets as demonstrated by the example in PTM042100 in the PTM

• the changes to the guidance made during the move from the Registered Pension Schemes Manual to the PTM and subsequent amendments have clarified this view. We have not and could not legitimise in specie contributions, as that would be contrary to the legislation. The guidance should not be read as doing so

• the steps described in the guidance are provided as an example. They are not an exercise to be followed that means contributions will automatically be accepted by HMRC as qualifying for tax relief

The PTM is reviewed regularly and we are confident that the guidance reflects the view outlined above and that it accurately reflects the legislation.

1.2 HMRC compliance activity

HMRC were aware that there were a number of risks around claims for relief on contributions involving the transfer of an asset or assets. To address these risks we introduced further information requirements on the relief at source (RAS) claims forms (APSS105 and APSS106) with effect from 6 April 2016. Information provided on the returns made after these changes demonstrated that our concerns were valid. As a result, a number of enquiries were opened into RAS claims and these are ongoing.

HMRC will continue to look into transactions where there are concerns that the transfer of an asset does not give effect to a cash contribution. The reasons why we may consider that the transfer of an asset does not give effect to a cash contribution are numerous, but may include:

• the value of the asset is not sufficient to give effect to the pre-existing obligation to make the cash contribution

• the nature of the asset is such that it is not capable of being able to meet the pre-existing obligation to make the cash contribution

• there is no or insufficient evidence that there was a pre-existing obligation to make a cash contribution (the steps in the example in the PTM are the minimum we would expect to see when considering this)

HMRC undertakes compliance activity on a case by case basis and the outcome will depend upon the facts and circumstances specific to each individual case.

2. Registration statistics

For 2016 to 2017 HMRC received in total 3,867 applications to register pension schemes. This is a 12% reduction compared to applications received in 2015 to 2016.

Of these schemes, 84% have been registered and HMRC has currently refused registration for about 7% of applications. No decision has yet been made on the remainder.

Since 2012 to 2013 HMRC has seen a 74% decrease overall in the number of applications to register pension schemes.

3. Relief at source

3.1 Relief at Source - annual returns of individual information for 2015 to 2016

In January 2016 we issued notices requiring pension schemes operating relief at source to submit their annual return of individual information (also known as the RPSCOM100(Z)) for tax year 2015 to 2016 to HMRC by 5 October 2016.

The deadline for submitting the 2015 to 2016 returns has passed but there are still a number outstanding. In Pension Schemes Newsletter 84 and Pension Schemes Newsletter 85 we reminded scheme administrators that failure to submit this information by the deadline will hold up any subsequent interim repayments pending receipt of the outstanding information. Where a submission is made but fails processing, we still deem this to be outstanding and will stop any subsequent interim repayment claims pending successful re-submission.

If your submission fails for a third time, we’ll stop all future interim repayments until a further re-submission is received and is deemed successful.

If you need any help with the information that is required on the return, or if you have any difficulties in providing this information, please contact HMRC Pension Schemes Services.

If you need any help or advice on submitting this information, please contact [email protected] or 03000 582413.

Since October 2014 we’ve stopped a number of interim repayment claims for non-submission or submission failure and where possible have worked closely with pension scheme administrators to help them meet their obligations.

If you’re a pension scheme administrator operating a relief at source pension scheme but have yet to receive a notice requiring you to submit this information for 2015 to 2016, email [email protected] and put ‘Relief at Source - Notice to file’ in the subject line of your email.

You can find more information on relief at source repayments and the member information we need relating to those repayments in the GOV.UK guide Relief at Source annual information returns.

3.2 Change of filing deadline for annual return of individual information for 2016 to 2017

In Pension Schemes Newsletter 84 and Pension Schemes Newsletter 85 we explained that the filing deadline for the annual return has changed from October to July each year.

We sent out information notices for the 2016 to 2017 annual return of individual information at the end of January 2017 and for the 2016 to 2017 tax year the filing deadline for the annual return is 5 July 2017.

If you’re a pension scheme administrator operating Relief at Source and you’ve still not received a notice to submit your 2016 to 2017 annual return, email [email protected] and put ‘Relief at Source - Notice to File’ in the subject line of your email.

3.3 Relief at source – members with no National Insurance (NI) number

As we explained in Pension Schemes Newsletter 68 we know that some schemes may be accepting statements from members who have a NI number but who have not given this to the scheme administrator.

Regulation 4(2) of the Registered Pension Schemes (Relief at Source) Regulations 2005 - SI 2005/3448 states that when a member joins a scheme and before they make their first RAS contribution, they or a representative will have to provide the scheme administrator with some basic personal information such as the member’s:

• full name
• permanent residential address (including postcode if resident in the UK)
• date of birth
• NI number

If the member does not have a NI number, they can provide a statement giving reasons why they do not hold such a number, for example because they are under the age of 16, or they are a citizen of a country outside the United Kingdom and are not resident in the United Kingdom.

If a member doesn’t know if they have a NI number or has lost their NI number, they can find more information on GOV.UK at find a lost national insurance number.

We want to remind scheme administrators that a pension scheme should not accept contributions as relievable contributions without the relevant declarations/statements. In those circumstances, the member has no entitlement to relief at source.

So if you haven’t been supplied with a NI number or a statement giving the reasons why the member does not have a NI number (as per regulation 4(2) of SI 2005/3448) RAS cannot be claimed. And when you do receive the NI number or statement, you cannot make a retrospective claim for RAS in respect of the period prior to when you received the information.

This doesn’t affect your right under regulation 11(7) of SI 2005/3448 to make a supplementary claim for relief at source to correct an error.

If a scheme makes relief at source claims for such members, HMRC is entitled to ask for the relief at source to be repaid. Pension scheme administrators who think may have given relief at source in these circumstances should email [email protected] and put ‘Relief at source NINO’ in the subject line of the email and we’ll work with you on a case by case basis to correct the position.

4. Lump sum death benefits – information requirements

In Pension Schemes Newsletter 84 we explained that we were developing 2 new forms to help scheme administrators and trustees meet their information obligations on taxable lump sum death benefits paid to trusts.

The new forms are now available for scheme administrators and trustees to use.

Scheme administrators should use R185 (Pension scheme admin) to provide information to a trustee, who is not a bare trustee, about a lump sum death benefit that was subject to the special lump sum death benefits charge under section 206 Finance Act 2004.

Scheme administrators should provide this within 30 days of making the payment to the trust. The trust receiving the payments should keep this form.

The trustees will need this so they can provide this information to the beneficiary if they make an onward payment.

A trustee, who is not a bare trustee, should use R185 (LSDB) to provide information to a beneficiary about a payment made to that beneficiary funded by a lump sum death benefit that was subject to the special lump sum death benefits charge under section 206 Finance Act 2004.

Trustees should provide this to the beneficiary within 30 days of making the payment, or within 30 days of receiving the information from the scheme administrator, whichever is the latest.

You can find more information on GOV.UK about trusts and taxes.

5. Pension flexibility statistics

The quarterly release of official statistics on flexible payments from pensions for the period 1 January to 31 March 2017 will be published on 26 April 2017.

Further to this, we can now provide more information on the number of tax repayment claim forms (P55s, P53Zs and P50Zs) processed in respect of pension flexibility payments.

From 1 January to 31 March 2017 we processed:

P55 = 4,102 forms

P53Z = 4,113 forms

P50Z = 795 forms

Total value repaid: £22,810,697

Figures for the period 1 April to 30 June 2017 will be published in July 2017.

6. Lifetime allowance

6.1 Individual protection 2014 (IP2014)

The deadline for applying for IP2014 closed on 5 April 2017.

Although the deadline for applications for IP2014 has closed, scheme members will still be able to log onto the lifetime allowance online service and amend an existing IP2014 application after this date.

Members can find more information about the lifetime allowance and protecting their pension savings on GOV.UK.

6.2 Lifetime allowance look-up service for pension scheme administrators

In Pension Schemes Newsletter 84 we explained that there had been a delay in the delivery of the lifetime allowance look up service for pension scheme administrators. We are continuing to develop this and aim for a basic look up service to be available online this summer.

Scheme administrators will be able to enter the two protection reference numbers provided to them by the member and will receive a response telling them the type and status of protection the member holds.

We are continuing to develop a secure, authenticated look up service that will provide more information on the protection status of your members. We will keep you updated on progress.

6.3 Lifetime allowance online service – additional member function

We are continuing to develop the lifetime allowance online service and will add an additional member function so that members can tell us online if they have lost protection.

Currently members have to tell us in writing that they have lost protection. When we receive these notifications, we process and respond to them manually.

The new function means that members will receive an immediate response when they tell us online that they have lost their lifetime allowance protection. Members with two forms of lifetime allowance protection (one active and one dormant) who notify us through the online service that they have lost one protection will get an immediate response confirming that the dormant protection is active and providing new reference numbers regarding the newly active protection.

We are aiming for this function to be available later in the year and will provide an update in due course.

In the meantime, pension scheme members should continue to contact HMRC in writing to tell us if they have lost their protection until the new function goes live later in the year.

7. Contacting Pension Schemes Services

7.1 Changes to postal address

The postal address for Pension Schemes Services has changed. If you need to write to us, you should write to:

Pension Schemes Services
HM Revenue and Customs
BX9 1GH
United Kingdom

7.2 Emailing Pension Schemes Services

If you are emailing Pension Schemes Services, please make sure that you either use the link on the contact HMRC page or email [email protected].

Please do not reply on the back of the automatic acknowledgment email from [email protected] or send queries to this email address because we are unable to access this mailbox.

We have been contacted by some customers who have sent queries to the automatic acknowledgment mailbox in error. We are working to access these emails and will update the automatic acknowledgment to make it clear not to reply on the back of it.

8. Qualifying recognised overseas pension schemes (QROPS)

8.1 Changes to the scheduled publication of the ROPS notifications list

In Pension Schemes Newsletter 85 we told you about planned changes to the scheduled publication of the ROPS Notification List following recent changes to the pension tax rules relating to overseas pension schemes.

There are additional changes planned to the scheduled publication of the ROPS notification list as follows:

• 18 April 2017 - we published an updated list
• 1 May 2017 - routine publication of the ROPS notifications list
• 15 May 2017 - routine publication of the ROPS notifications list
• 2 June 2017 - we will suspend the ROPS notifications list
• 5 June 2017 - we will publish an updated list
• 15 June 2017 - routine publication of the ROPS notifications list

8.2 QROPS forms

Following the recent changes to the information requirements for pension scheme administrators and overseas scheme managers, we have updated our forms relating to overseas pension schemes. We want to remind pension scheme administrators and overseas scheme managers to use the latest version of the forms that are available online from our pension scheme forms GOV.UK page.

The updated forms include the additional information you are required to provide and we have also taken the opportunity to convert most of the forms to print and post iforms in line with HMRC’s ongoing digital strategy. We will reject old versions of the forms that don’t contain the information required under the new pension tax rules.

We would also remind all pension scheme administrators that if you fail to provide the information required under the new pension tax rules within the relevant timescales, you may be liable to penalties. This includes circumstances where we have had to reject a form for any reason and have sent you a request to resubmit.

9. Scottish rate of Income Tax

We have received a number of queries from pension scheme administrators about the Scottish rate of Income Tax and how this affects registered pension schemes operating relief at source. We are planning to publish a newsletter on this subject to update you on our work and progress to date including:

• implementation timelines
• technical specifications
• information on the enrolment process onto Secure Data Exchange Service
• information on the output that scheme administrators can expect from HMRC

We aim to publish this newsletter early May 2017.

10. Annual allowance scheme pays

10.1 Declaring scheme pays annual allowance charge on the Self-Assessment tax return

Please remind your members that they need to report the annual allowance charge on their Self-Assessment tax return even if your scheme is paying the charge on their behalf. Scheme members should fill in boxes 10 and 11 under ‘other information’ of SA101.

10.2 Scheme pays guidance

Following a number of requests from pension scheme administrators, we have updated the guidance on annual allowance scheme pays in the PTM to clarify the scope of mandatory scheme pays.

You can find the updated guidance in PTM056410.