Guidance

Pension schemes newsletter 83 - December 2016

Published 12 December 2016

1. Autumn Statement 2016

At the Autumn Statement on 23 November 2016, the government announced a number of measures in connection with pensions.

a. Foreign pensions

The government announced that a number of changes are being made to the tax treatment of foreign pensions which will more closely align them with UK pension savings.

The changes will:

• bring foreign pensions and lump sums paid to UK residents fully into tax
• close specialist pension schemes for those employed abroad (‘section 615’ schemes) to new saving
• extend taxing rights from five to ten tax years over non-UK residents’ foreign lump sum payments out of funds that have had UK tax relief
• align the tax treatment of funds transferred between registered pension schemes
• update the conditions foreign schemes must meet to get UK tax relief on contributions and transfers by removing the requirement for 70% of transferred funds to be used to provide the member with an income for life

The changes will apply from 6 April 2017. Draft legislation and draft forms were published on 5 December 2016.

Any comments on the draft legislation should be submitted by email: pensions.policy@hmrc.gsi.gov.uk by 1 February 2017.

b. Pension scams

On 5 December 2016 the government launched a consultation on ways to tackle pension scams. The consultation proposes taking action in three key ways:

• banning pension cold calls to stop people being targeted by and becoming victims of scammers
• giving more powers to pension scheme administrators so that they can block transfers to schemes they suspect of being scam schemes, providing certain rules are met
• making it harder for scammers to open small schemes (formerly known as small self administered schemes) for scam purposes

The pension scams consultation has been published.

You should submit any consultation responses by email: PensionScamsConsultation@HMTreasury.gsi.gov.uk by 6 February 2017.

c. Reduction to money purchase annual allowance (MPAA)

The government announced that it is launching a consultation seeking views on the impacts of lowering the level of the MPAA to £4,000. The consultation is being led by HM Treasury and will run until 15 February 2017.

Following the consultation, the level of the MPAA will be announced at Budget 2017 and changes included in the Finance Bill 2017.

The Reducing the money purchase annual allowance consultation has been published.

You should submit any consultation responses by email: MPAAResponses@hmtreasury.gsi.gov.uk.

Or you can write to:

Pension and Savings Team
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ

2. Lifetime allowance

a. Amending lifetime allowance protections

On 14 November 2016 we added a function to the Lifetime Allowance Online Service for members to amend the details of their protection online.

Pension scheme members can:

• amend the amounts entered when they applied for individual protection 2014 (IP2014) and individual protection 2016 (IP2016) if they made a mistake
• add or amend a pension debit because they received a discharge notice as a result of a pension sharing order - within 60 days of receiving the notice

If members protected their pension savings online they will be able to amend their protections themselves, for example if they made mistakes with the values when they applied or if they have pension debits which affect the amount they have protected.

Pension scheme members should make these amendments by logging into their personal tax account and selecting the ‘pensions’ option.

If members did not protect their pension savings online, they should tell HM Revenue and Customs (HMRC) in writing about these changes and HMRC will write to let the member know how it affects their protection.

b. Losing lifetime allowance protection

If a pension scheme member has lost their protection they need to tell HMRC in writing. They will need to include:

• their full name, address and national insurance number
• the exact date that they lost protection
• the reason why protection was lost - benefit accrual, auto enrolment etc
• the type of pension arrangement (defined contribution or defined benefit)
• their original lifetime allowance protection certificate where relevant

If the member has a paper certificate, they should send this with the information needed to HMRC by post.

If the member applied for IP2016 or fixed protection 2016 and doesn’t have a certificate, this information can be provided by email.

3. Unauthorised borrowing

Following a number of queries about reporting of unauthorised borrowing we want to remind schemes about the guidance and confirm the reporting process.

If a registered pension scheme borrows an amount that is not authorised, the pension scheme is treated as making a scheme chargeable payment under section 183 or 185 Finance Act 2004. A scheme chargeable payment in relation to unauthorised borrowing is subject to a scheme sanction charge, please read PTM121000.

The information that the scheme must provide is:

• the name of the pension scheme that is treated as making the scheme chargeable payment
• the pension scheme tax reference number for the pension scheme concerned
• the name and address of the scheme administrator of the pension scheme treated as making the scheme chargeable payment
• the tax year in which the scheme chargeable payment is treated as having been made
• the aggregate amount of the scheme chargeable payments treated as having been made under section 183 or 185 Finance Act 2004 by the pension scheme for the tax year

To help you make your report there is a print and post form that can be used, the unauthorised borrowing report APSS303.

Your completed form should reach HMRC:

• after the end of the tax year to which it relates
• on or before 31 January following the end of the tax year to which it relates unless the scheme has wound up

4. Serious ill-health lump sums - reporting through Real Time Information (RTI)

In Pension Schemes Newsletter 81 we explained that the tax treatment of serious ill-health lump sums changed following Royal Assent to Finance Bill 2016.

HMRC is currently working on the RTI amendments which will include a separate field for serious ill-health lump sum payments to individuals over 75 but the RTI system won’t be updated straight away.

We said in Pension Schemes Newsletter 81 that this new field was due to be released in December however we won’t be able to publish details of this until early in 2017. We are sorry for any inconvenience caused by this further delay.

We are aware that this may cause problems in designing and developing your software to be able to report these payments using the new data field on RTI. So to help with this, whilst it is still mandatory that you report serious ill-health lump sum payments, it will not be mandatory to report these payments using the RTI data field until 6 April 2018. However where possible we ask that pension scheme administrators report using the new data field as soon their software is updated.

In the meantime pension scheme administrators who need to report payments of serious ill-health lump sums to HMRC should continue to follow the guidance in Pension Schemes Newsletter 81.

5. Relief at source - annual returns of individual information for 2015 to 2016

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

The deadline for submitting the 2015 to 2016 annual return of individual information has passed but there are still a number of these returns outstanding.

In Pension Schemes Newsletter 81 and Pension Schemes Newsletter 82 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 failure occurs on the third submission we will stop all future interim repayments until a further re-submission is received and is deemed successful.

Since October 2014 we have 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 are a pension scheme administrator operating a relief at source pension scheme but have yet to receive a notice requiring you to submit this information, please email: pensions.businessdelivery@hmrc.gsi.gov.uk and put ‘Relief at Source’ 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 relief at source in Pension administrators: Relief at Source annual information returns.

6. Overseas pension schemes

a. APSS262 and APSS253 - submitting information by spreadsheet

As you may be aware pension scheme administrators and scheme managers of qualifying recognised overseas pension schemes (QROPS) must tell HMRC information about transfers to and payments from QROPS. We have provided the APSS262 and APSS253 forms to help with this.

You can also submit the same information about these transactions for multiple members by spreadsheet, but this must be submitted with a valid declaration.

We have recently received spreadsheets containing this information without a valid signed and dated declaration.

Any spreadsheet that isn’t accompanied by a signed and dated declaration will be rejected.

To avoid your spreadsheets being rejected we want to remind all pension scheme administrators and managers of QROPS to send the signed and dated declaration along with the spreadsheet.

b. QROPS online

From April 2017 QROPS online will no longer be accessible. Changes to QROPS forms in recent years mean that the system no longer captures the correct information so we are closing QROPS online.

Pension scheme administrators and managers of overseas schemes can find more information about the pension tax rules on overseas pension schemes including the latest version of the forms to report information we require, on the overseas pension scheme pages.

c. QROPS statistics

The first annual release of official statistics on transfers to QROPS was published on 6 December 2016 and included the number of transfers and the total amount transferred by tax year. This first publication included figures for tax year 2006 to 2007 to tax year 2015 to 2016 inclusive. Future releases will be published in July each year from July 2017 and will include information from the previous tax year.

You can find more details at updates for HMRC statistics and statistics at HMRC.

7. Scottish rate of Income Tax (SRIT) and relief at source

In Pension Schemes Newsletter 82 we explained the research that we have been doing to develop the digital channel so that pension scheme administrators can submit the annual return of individual information (also known as the RPSCOM100(Z)) digitally.

As we explained this is really important because when SRIT is introduced HMRC will use the data submitted on these returns to:

• identify Scottish taxpayers
• notify pension scheme administrators of the correct relief at source rates to apply to their scheme members in the following tax year

We can now tell you that the digital solution for you to submit your annual returns of individuals information and for HMRC to tell pension scheme administrators the correct relief at source rates to apply to scheme members will involve both Application Programming Interface (API) and Secure Data Exchange Service (SDES). SDES is free to use and will replace Secure Electronic Transfer (SET) which some administrators currently use.

Pension scheme administrators who currently use SET will be automatically migrated to SDES. If you don’t already use SET we will provide support to help you to enroll on SDES. We will also develop an API (with additional support) for those pension scheme administrators who have the relevant IT in place. You can find more information about API at HMRC third party tax software and API strategy.

We aim to publish the technical specifications for the outbound rate notifications in January 2017. Please read Electronic Flat Text File specification for returns for more information. We don’t expect that these will change, although we will be creating an API version of this.

The annual returns of individual information will continue to be required annually with paper submission still available for the next two tax years.

In 2017 we will work with pension scheme administrators before submission of the 2016 to 2017 annual return of individual information to cleanse their National Insurance number data. We are still working through how to do this and we will provide more information on this as soon as we can.