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HMRC internal manual

Pensions Tax Manual

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HM Revenue & Customs
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Annual allowance: tax charge: scheme pays: deadlines

Glossary PTM000001
   

 

Notice given to the scheme administrator by the member
How the scheme accounts for their liability to an annual allowance charge under ‘Scheme Pays’
Including the payment on an Accounting for Tax (AFT) return and making payment
The member’s Self Assessment return

Section 237B Finance Act 2004

If a member decides to elect to require their scheme to pay all or part of their annual allowance charge then they will need to meet certain conditions and they will also need to give their scheme administrator notice that they want the scheme to pay their annual allowance charge (See PTM056420). This notice will need to be received by the scheme by a cut-off date if the scheme is to become jointly and severally liable to the annual allowance charge.

Once a scheme becomes jointly and severally liable to the member’s annual allowance charge then there are also deadlines for the scheme to include this liability on the Accounting for Tax return.

Notice given to the scheme administrator by the member

The member must notify the scheme that they wish to use ‘Scheme Pays’ by 31 July in the year following the year in which the tax year to which the annual allowance charge relates ended. The notice must be given to the scheme administrator of the pension scheme concerned.

For example, if the member wants their scheme to pay their annual allowance charge for 2013-14 then they must tell their scheme no later than 31 July 2015. For the 2011-12 tax year only, the member needed to give notice by 31 December 2013.

The member cannot notify the scheme that they wish to use scheme pays before the end of the tax year in which the annual allowance charge arises.

Alternatively, the notice deadline is brought forward when the member is due to:

  • become entitled to all of their benefits from the pension scheme; or
  • reach age 75 and one or more of the following events happen in relation to their pension scheme at that age:

    • defined benefit rights not yet in payment in the pension scheme will remain undrawn
    • funds in an other money purchase arrangement or cash balance arrangement in the pension scheme that you have not yet drawn (‘uncrystallised funds’) will remain as uncrystallised funds
    • drawdown pension funds in the pension scheme that started after 5 April 2006 will still be in place. 

Then the member must notify the scheme before that entitlement to all benefits, or the age of 75 event, occurs.

PTM056450 has more details about when the deadline for giving a notice is brought forward.

PTM056420 has details of the information that must be given in a notice, whether given by the usual 31 July deadline or a brought forward deadline.

PTM056440 has details about the deadlines for members giving an amended notice to a scheme administrator.

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How the scheme accounts for their liability to an annual allowance charge under ‘Scheme Pays’

Where a scheme administrator becomes jointly and severally liable to a member’s annual allowance charge under ‘Scheme Pays’ the tax charge should be included on the scheme’s accounting for tax (AFT) return - see PTM162000 for more information about the AFT.

The AFT return is a quarterly return and ordinarily the scheme administrator only needs to complete an AFT return if one or more of the tax charges that the scheme administrator is responsible for paying has arisen in a quarter.

Where the scheme administrator’s liability to a tax charge has arisen because of ‘Scheme Pays’ the reporting and payment of that liability can be made to a different deadline.

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Including the payment on an Accounting for Tax (AFT) return and making payment

The scheme administrator will pay the tax and account for it on the accounting for tax (AFT) tax return but the member will also have to include it on their own self-assessment form.

Ordinarily, the scheme should account for the annual allowance tax charge for a tax year on an AFT return no later than the quarter ending 31 December of the year following the year in which the tax year ended. And the scheme must then file the AFT and pay the tax due by the second 14 February that follows the end of the tax year to which the liability relates.

For example, for a liability relating to the 2012-13 tax year, the scheme must include this on an AFT return by the quarter ending 31 December 2014 and file the AFT and pay the tax due by 14 February 2015.

These deadlines are the latest that a scheme should complete the AFT and make the payment of the tax due. The scheme can decide to include the liability on an earlier AFT and if it does so, the date for payment of the tax is the normal payment date for that return.

For example, a member notifies their scheme that they require it to pay their annual allowance charge for 2013-14 and they give this notice on 15 September 2014. The scheme administrator decides to pay the tax before the statutory deadline of 14 February 2016 for filing the AFT return for the period 1 October - 31 December 2015 and includes the payment on the AFT submitted for the period 1 October - 31 December 2014. They must pay the tax due to HMRC by 14 February 2015.

If the scheme agrees to pay an amount of a member’s annual allowance charge liability on a voluntary basis, the scheme would not have joint and several liability for the tax charge and the liability for the annual allowance charge would remain with the member. The payment made by the scheme on a voluntary basis should therefore be paid to the member’s normal Self Assessment deadline. If the AFT process is being used to report and pay the tax being paid by the scheme on a voluntary basis, the scheme administrator will need to consider which quarterly period to use.

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The member’s Self-Assessment return

The member will need to include the amount of the annual allowance charge on their SA tax return which should be submitted at the latest by 31 January of the year following that in which the tax year ended. If their scheme has joint and several liability to or has voluntarily agreed to pay any part of the annual allowance charge then the member will need to include this amount on their tax return. The member will be liable for any remaining charge and this amount should be paid to the normal Self Assessment deadline. (See PTM056200).