Guidance

Pension schemes newsletter 149 — April 2023

Published 26 April 2023

1. Spring Budget 2023 – Lifetime Allowance

In pension schemes newsletter 148 we told you that on 15 March 2023 the Chancellor announced that he would introduce legislation to ensure that nobody faces a lifetime allowance charge from 6 April 2023. As a result, where the following lump sum payments were previously subject to a lifetime allowance charge of 55%, from 6 April 2023 they will be taxed at the recipient’s marginal rate of income tax:

• serious ill-health lump sum
• uncrystallised funds lump sum death benefit
• defined benefits lump sum death benefit
• lifetime allowance excess lump sum

The lifetime allowance guidance newsletter published on 27 March 2023, provided further guidance on these payments. This set out that where schemes identify one of the above lump sums, normal PAYE rules would apply to these payments, and they should be treated as pension income.

The newsletter also explained that the process for dealing with defined benefits lump sum death benefits and uncrystallised funds lump sum death benefit would change. You were advised that you would need to first contact the legal personal representative of the deceased member to find out how much available lifetime allowance the member has, telling them the type and amount of the benefit to be paid. This would enable you to determine whether the deceased member’s lifetime allowance had been used up and whether any of the benefit should be subject to tax at the beneficiaries’ marginal rate.

Many representatives from across the industry raised concerns around this new process for the taxation of death benefits. These concerns were discussed in depth at the first lifetime allowance working group which took place on 4 April 2023. A strong preference was expressed for maintenance of the system in place prior to 6 April 2023. Under this process, if the member’s legal personal representative identified a chargeable amount after payment of a defined benefits lump sum death benefits or uncrystallised funds lump sum death benefit, they reported this to HMRC. It is HMRC that then assesses the tax due.

In light of concerns raised, we agreed to consider alternative options.

From 6 April 2023, schemes may continue to use the current process for taxation of the defined benefits lump sum death benefits or uncrystallised funds lump sum death benefit. Based on information provided by legal personal representatives, HMRC will raise marginal rate taxation (as opposed to a lifetime allowance charge) on the applicable portion of these payments. This may mean that HMRC will be approaching affected beneficiaries following the end of the tax year in line with the existing process but with marginal rate charge instead of lifetime allowance charge.

This process will continue until we develop a longer-term position for the full abolition of the lifetime allowance from 6 April 2024.

Further information will continue to be provided in lifetime allowance guidance newsletters.

2. Annual allowance calculator

We are currently updating the annual allowance calculator to include the changes announced at Spring Budget 2023. This means that the tax year 6 April 2023 to 5 April 2024 is currently unavailable. Your pension scheme members can still use the calculator for all years up to and including tax year 2022 to 2023.

Find more information about the annual allowance for tax year 2023 to 2024.

We expect the calculator to be updated for tax year 2023 to 2024 in Summer 2023 and we’ll provide further updates in a future newsletter.

3. Relief at source

3.1 Annual return of information for tax year 2022 to 2023

The deadline for submitting the 2022 to 2023 annual return of information is 5 July 2023. If you do not submit this on time, it may delay:

• payment of interim claims for the tax month ending 5 July 2023
• payment of any claims for subsequent months until we receive your annual return of information

You must make sure you submit the APSS590 annual return of information declaration with your annual return of information.

You can either:

• send the APSS590 annual return of information declaration by post
• email the APSS590 annual return of information to reliefatsource.administration@hmrc.gov.uk and put ‘APSS590 Annual return of information declaration’ in the subject line

If you do not submit it, your annual return of information will fail processing. If it fails processing, we’ll:

• still consider this to be outstanding
• stop any subsequent interim repayment claims until we receive a re-submission

If failure occurs on the third submission, we’ll stop all future interim claims until we receive a further re-submission that is considered successful.

You can only submit your 2022 to 2023 annual return of information through the Secure Data Exchange Service.

3.2 APSS107 Registered pension schemes annual statistical return

We will no longer require scheme administrators who operate relief at source to send in a registered pension schemes annual statistical return (APSS107). This will apply for tax years ending 5 April 2023 onwards.

GOV.UK guidance has been updated to reflect this change.

4. Registration statistics

For tax year 2022 to 2023, HMRC received in total 1,511 applications to register new pension schemes.

Of these schemes, 68% have been registered and we have refused registration for 21% of applications. No decision has been made on the remainder yet.

5. Pension flexibility statistics

We can now give more information on the number of tax repayment claim forms processed for pension flexibility payments.

From 1 January 2023 to 31 March 2023, we processed:

• P55 ― 9,654 forms
• P53Z ― 4,361 forms
• P50Z ― 1,841 forms

Total value repaid: £48,550,827

The tax repayment figures for the period 1 April 2023 to 30 June 2023 will be published in pensions schemes newsletter ― July 2023.

6. Managing pension schemes service

6.1 Pension Scheme Return

In pension schemes newsletter 146 we told you we’d be releasing the functionality to submit a Pension Scheme Return for the tax year ending 5 April 2024, on the Managing Pension Schemes service.

This means that if you have received a notice to file for the tax year ending 5 April 2023, this will be the last year’s Pension Scheme Return you will need to submit on the Pension Schemes Online service.

From April 2024, if you need to submit a new return or amend a previously submitted return for the tax year 2022 to 2023 or earlier, you can continue to do this on the Pension Schemes Online service. However, you’ll no longer be able to submit any Pension Scheme Returns for any period using third party software. You’ll need to compile and submit the return directly on the relevant service.

Whether or not you have previously received a notice to file a Pension Scheme Return is no indication of whether you’ll be issued with a notice to file for the tax year ending 5 April 2024 or subsequent years, on the Managing Pension Schemes service.

There will still be two types of the Pension Scheme Return, standard and SIPP. The type of scheme you have registered will determine which Pension Scheme Return you will have to complete.

From 6 April 2024, some of the questions on the Pension Scheme Return will change and more detail will be required on transactions made by the pension scheme and members.

For the standard return, depending on the size of the pension scheme you will need to include details of:

• members
• transfers, contributions and pension payments
• loans
• some share and bond transactions
• scheme borrowing
• property
• other asset transactions

The SIPP return will require more detail to be provided in relation to certain transactions relating to:

• connected party transactions
• unquoted shares
• loans

When the Pension Scheme Return is released on the Managing Pension Schemes service, you’ll be able to choose to upload a file of member details or add the details manually.

If your scheme is not already registered or migrated on the Managing Pension Schemes service, to ensure you have plenty of time to complete your 2023 to 2024 Pension Scheme Return, you’ll need to make sure you’ve migrated your pension scheme by April 2024 at the latest. This will mean when you receive a notice to file a Pension Scheme Return, you’ll have until 31 January 2025 to file it.

If you migrate your pension scheme after this date, it could impact on this filing deadline. From 31 October 2024, when a scheme is migrated, notices to file for tax year 2023 to 2024 will have a filing deadline of three months from the date of issue.

If you delay migration further, then when you do migrate your pension scheme, notices to file for any applicable years will automatically be issued and backdated to the tax year 2023 to 2024. Where the notice to file is issued for any earlier years, the Pension Scheme Return must be submitted within three months of the date the notice to file was issued.

For example, if you choose not to migrate your pension scheme until 1 August 2026, you will receive:

• a notice to file a Pension Scheme Return for tax year 2023 to 2024 with a filing deadline of 1 November 2026
• a notice to file a Pension Scheme Return for tax year 2024 to 2025 with a filing deadline of 1 November 2026
• a notice to file a Pension Scheme Return for tax year 2025 to 2026 with a filing deadline of 31 January 2027

Where a Pension Scheme Return is not received by the specified filing deadline, you’ll be charged a £100 penalty. Daily penalties of up to £60 may also be charged if the return is still not submitted. You can find more information on reporting to HMRC.

Take action to migrate your pension schemes now

To migrate your pension schemes, log in to the Managing Pension Schemes service, select ‘Add a pension scheme from the Pension Schemes Online service’ and select each scheme you need to migrate.

If you’ve incorrectly tried to re-register an existing pension scheme that you’re an administrator for, email migration.mps@hmrc.gov.uk and put ‘Incorrect scheme registration’ in the subject line. Do not select ‘apply to register a new pension scheme’.

You can find further guidance on migrating your pension schemes to the Managing Pension Schemes service on GOV.UK.

6.2 Accounting for Tax returns

This is a reminder that you must use the Managing Pension Schemes service to submit any new Accounting for Tax returns for any quarter beginning on or after 1 April 2020.

If your pension scheme has a Pension Scheme Tax Reference beginning with 0, and you have not already done so, you’ll need to have migrated your pension scheme to the Managing Pension Schemes service to be able to file your Accounting for Tax return.

If you need to submit a return for the quarter 1 January 2023 to 31 March 2023, you’ll need to have migrated your pension scheme and submitted the return on the Managing Pension Schemes service by the filing deadline of 15 May 2023 to avoid interest and penalties.

Find information on how to submit an Accounting for Tax return using the Managing Pension Schemes service.

6.3 Event Reports

In summer 2023, pension scheme administrators and practitioners will be able to create, compile and view the Event Report in-year for tax year 2023 to 2024 on the Managing Pension Schemes service. If your pension scheme has a Pension Scheme Tax Reference beginning with 0, and you have not already done so, you’ll need to have migrated your pension scheme to the Managing Pension Schemes service to be able to compile and submit your Event Report.

If you need to submit a new Event Report or amend an existing Event Report for the tax year 2022 to 2023 or earlier, you can continue to do this on the Pension Schemes Online service.

You are no longer able to submit any Event Reports for any period using third party software. You’ll need to compile and submit the report directly on the relevant service.

There’ll be no limit on the number of members or events that can be reported in a single Event Report. You’ll also be able to enter details of all types of lifetime allowance protection and enhancement reference numbers. You can read more about upcoming Event Report functionality in pension schemes newsletter 148.