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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: amended member notices

Glossary PTM000001
   

 

The information required in the notice
Where the member has reduced the amount they require the scheme to pay
Paying the additional amount of tax if the member has increased the amount they ask the scheme to pay

After a member has required their scheme to pay an amount of their annual allowance charge they are able to change the amount that they have asked the scheme to pay. This could happen because their annual allowance charge liability for the tax year concerned was more, or less, than they realised when they gave their original notice.

There is a time limit for the member to ask the pension scheme to change the amount of the annual allowance charge that they want it to pay. The scheme administrator must receive the member’s request no later than the 31st July that follows the end of the period of 4 years from the end of the tax year to which the member’s liability relates.

For example, if the member’s annual allowance charge relates to the tax year 2011-12 their request to change the amount that they have already asked the pension scheme to pay must be received by the scheme no later than 31st July 2016.

Where a pension scheme has agreed to pay an amount of a member’s annual allowance charge on a voluntary basis then the scheme may also allow the member to change the amount that they have asked it to pay.

The information required in the notice

The member’s notification to change the amount that they have already asked the scheme to pay must contain the same information as was on their original notice (See PTM056420) and must also state:

  • the tax year to which the annual allowance charge liability relates
  • the amount of their annual allowance charge liability that they now want the scheme to pay on their behalf for that year, and
  • that the amount of the liability they now want the scheme to pay has been calculated at the proper rate.

Where the member has reduced the amount they require the scheme to pay

If the deadline has not yet been reached for the pension scheme to pay the tax that was on the original notice, the same deadline will continue to apply for the revised amount and the adjustment to the member’s benefit’s should now reflect the lower amount of tax paid.

Where a scheme receives an amended notice which reduces the amount of liability the pension scheme will have to file an amended accounting for tax return (AFT). Where the scheme has already paid the tax to HMRC then the pension scheme will have to make a claim to HMRC who will then make the refund to the scheme. That refund will be dealt with in accordance with the scheme rules.

The member’s amended notice may mean that the amount of the annual allowance charge now due is £2,000 or less. If this happens then the member will not be able to confirm that their total annual allowance liability is more than £2,000. The scheme will not then have to accept the amended notice and they will no longer be jointly and severally liable to the member’s annual allowance charge. The liability for the tax due will then revert to being on the member.

In these circumstances the scheme can decide to pay the member’s annual allowance charge on a voluntary basis.

If the scheme has already paid the tax that was on the original notice but decides against paying the member’s annual allowance charge because the amount of charge now due is £2,000 or less, the pension scheme will have to make a claim to HMRC for the whole amount of tax that was paid.

Alternatively, if the scheme has already paid the tax that was on the original notice but agrees to pay an amount of the member’s actual annual allowance charge on a voluntary basis then the pension scheme will have to make a claim to HMRC for the excess amount of tax that has been paid.

In either case, HMRC will make the refund to the scheme for it to be dealt in accordance with the scheme rules.

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Paying the additional amount of tax if the member has increased the amount they ask the scheme to pay

If the deadline has not yet been reached for the pension scheme to pay the tax that was on the original notice, the same deadline will continue to apply for both the original amount and the additional amount. (See PTM056430.)

When the deadline for the original amount has passed when the member requires the scheme to pay an additional amount, the deadline for paying the additional amount will depend on the period of the year in which the request to pay the additional amount is received by the scheme.

When the member’s request for the scheme to pay an additional amount is received by the scheme in the period:

  • January to 31 March, the deadline for the scheme to pay that additional amount is the following 15 May,
  • 1 April to 30 June, the deadline is the following 14 August,
  • 1 July to 30 September, the following 14 November, and
  • 1 October to 31 December, the following 14 February.

Where a member has already taken all of their benefits since they required the scheme to pay the annual allowance charge, it may still be possible for the scheme to pay the member’s annual allowance charge provided that the benefits can be adjusted accordingly. However, there may have been adverse tax consequences for the member if, before 6 April 2013, a scheme reduced their scheme pension that was already in payment. From 6 April 2013 the specific circumstances in which a scheme pension in payment can be reduced have been extended to include a reduction as a consequence of the scheme administrator paying an amount of the member’s annual allowance charge (see PTM062300 for more details).

Alternatively it might not be possible for the scheme to pay the further amount of annual allowance charge because there are no assets in the scheme relating to the member. This could happen where a member’s pension has been purchased by way of an annuity policy on the open market in the member’s, or trustees’, name since the original notice was received and dealt with.

In both these circumstances (albeit the adverse tax outcome of reducing a scheme pension in payment as a consequence of the scheme paying the further amount of annual allowance charge should now be limited to reductions that would have occurred before 6 April 2013), the scheme administrator could ask HMRC that the scheme be discharged from paying the member’s charge if the scheme was unable to prevent the member from taking benefits before the scheme had dealt with the amended notice to pay the charge. This would be on the grounds that either:

  • a subsequent adjustment to the member’s benefit in payment has an adverse tax consequence for the scheme, or
  • the scheme is now incapable of paying a further amount of charge.

There is further guidance on these applications at PTM056470.