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HMRC internal manual

Pensions Tax Manual

Protection from the liftime allowance charge: individual protections 2014 and 2016: applying for individual protection 2016 (IP 2016)

Glossary PTM000001
   

How to apply for IP 2016 - introduction
“Relevant arrangement” and” relevant amount”
Applications for IP 2016 must be made online
Who can make an online application for IP 2016
Conditions required for a valid application for IP 2016
Will HMRC accept all applications for IP 2016?
How will a member know if HMRC has accepted their application for IP 2016 protection?
Dormant applications for IP 2016
When HMRC may withdraw an IP 2016 reference number
Appeal against HMRC’s refusal to issue or decision to withdraw an IP 2016 reference number
Notifying subsequent pension debits
What happens if the member dies before they have made an application for IP 2016?

How to apply for IP 2016 - introduction

Paragraphs 14 to 16 and 18 to 20 Schedule 4 Finance Act 2016

A member must have built up pension savings of more than £1 million by 5 April 2016 to be able to apply for IP 2016. There is no closing date for making an application - it may be made any time on or after 6 April 2016.

Applications for IP 2016 made before 6 April 2016 were invalid and were not processed by HMRC. Where a member has made an application that is invalid because it was made too early, they can resubmit their application at any time after 5 April 2016.

If someone wants to apply for IP 2016 then they will need to meet certain conditions. Once a member is satisfied that they meet the conditions they can apply to HMRC for IP 2016. The conditions are that:

  • they have one or more “relevant arrangements” (see next section) on 5 April 2016,
  • their relevant amount (see next section) on 5 April 2016 is more than £1 million,
  • they do not have primary protection (whether active or dormant) (see PTM092300 for more detail), and
  • they do not have individual protection 2014.

However, where as a result of a subsequent pension debit the value of a person’s pension rights falls below the amount entitling them to primary protection (£1.8 million) or individual protection 2014 (£1.25 million) they can subsequently apply for IP 2016 providing their relevant amount  exceeded £1 million on 5 April 2016.

The conditions do not prevent a member from applying for IP 2016 where they already have any of

  • enhanced protection
  • fixed protection
  • fixed protection 2014 or
  • fixed protection 2016.

However, if the member already has one of the protections referred to above and their IP 2016 application is successful it will operate on the “dormant basis” for so long as the other protection remains valid.  (See Dormant applications for IP 2016 for more detail.) The dormant basis applies because the other protections all protect a higher amount of lifetime allowance than IP 2016 so IP 2016 is not required while the other protection remains valid.

Once, an individual has IP 2016 there are no restrictions on what they are able to do with their future pension savings. For example, they will be able to continue building up benefits under every registered pension scheme they belong to and every relieved non-UK pension scheme of which they are a relieved member. However, the amount of any benefits in excess of the individual’s relevant amount will be subject to the lifetime allowance charge (see PTM080000).

“Relevant arrangement” and “relevant amount”

Paragraph 9(3) and 9(4) Schedule 4 Finance Act 2016

A member has one or more relevant arrangements if on 5 April 2016:

  • they are a member of one or more registered pension schemes, and/or
  • they are a “relieved member” (see PTM113410 for more detail) of a “relieved non-UK pension scheme” (see PTM113410).

The relevant amount is the total value on 5 April 2016 of the member’s pension rights in all their relevant arrangements. An individual can have different types of pension rights and for IP 2016 these have been categorised as Amounts A, B, C and D (see PTM094300).

Applications for IP 2016 must be made online

Paragraph 14(3)(c) Schedule 4 Finance Act 2016

Applications for FP 2016 must be made online on or after 6 April 2016.  Go to https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance for more detail.

Who can make an online application for IP 2016?

Paragraph 14(3)(a) Schedule 4 Finance Act 2016

An application can be made by either the member themselves or some other person on their behalf.

Conditions required for a valid application for IP 2016

Paragraph 14(3) Schedule 4 Finance Act 2016

An application for IP 2016 fixed protection should be made online on or after 6 April 2016 – see https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance . For the online application to be valid, certain conditions have to be met.  These conditions are that the application must:

  • be made by or on behalf of the individual concerned,
  • be made on or after 6 April 2016
  • be made online in a format authorised by HMRC
  • contain the individual’s title, full name, full postal address and email address and, where the individual is not the applicant, contain the same details for the applicant as well
  • give the individual’s date of birth
  • give the individual’s National Insurance number (or if they do not have a National Insurance number, the reasons for this),
  • give the value of their pension savings broken down into Amounts A, B, C and D as appropriate (see PTM094300)
  • the individual’s relevant amount (see PTM094300)
  • give the transfer date of any pension debit to which their pension savings have become subject since 6 April 2016 and before the application is made, and the amount of the discounted pension debit (that is, the amount by which their relevant amount is actually reduced) (see PTM094400)
  • contain a declaration that the member doesn’t have primary protection (see PTM092300)
  • contain a declaration that the member doesn’t have individual protection 2014 (see PTM094100)
  • contain a declaration that everything stated in the application is true and complete to the best of the applicant’s knowledge and belief.

Will HMRC accept all applications for IP 2016?

Paragraph 14(2) and (3) Schedule 4 Finance Act 2016

As long as the member completes the prescribed form giving all the information that is requested then the application is a valid application which will be accepted by HMRC. Where HMRC refuse to accept an application, the member has a right to appeal against that decision (see Appeal against HMRC’s refusal to issue or decision to withdraw a reference number).

How will a member know if HMRC has accepted their application for IP 2016?

Paragraph 14(1) to (3) Schedule 4 Finance Act 2016

When HMRC has received an application and accepted it as valid they will issue the member with a reference number unless the application is successful on a dormant basis (see next section). This will be done online.

Dormant applications for IP 2016

Paragraph 14(4) and (7) Schedule 4 Finance Act 2016

A member can apply for IP 2016 where they already have any of enhanced protection, fixed protection, fixed protection 2014 or fixed protection 2016 (collectively “the prior protection). Where this happens, if the IP 2016 application is successful it will operate on the “dormant basis” for so long as the prior protection remains valid.

An IP 2016 application is dormant where HMRC is satisfied that the application would have been accepted but for the existence of the prior protection.  HMRC will not issue the individual with a reference number unless and until such time as the individual loses their prior protection.

Where HMRC decides that an IP 2016 application should be accepted on a dormant basis, they must notify the applicant of their decision.

If and when the prior protection no longer applies, the member must inform HMRC of this, whereupon HMRC will issue them with a reference number for their IP 2016.

When HMRC may withdraw an IP 2016 reference number

Paragraph 15 Schedule 4 Finance Act 2016

HMRC may withdraw a reference number that they have issued to a member if:

  1. something contained in the member’s application was incorrect
  2. the member has subsequently successfully applied for any  individual protection 2014 or fixed protection 2016
  3. the member has any of enhanced protection, fixed protection, fixed protection 2014, individual protection 2014 or fixed protection 2016
  4. IP 2016 ceases to apply because the member’s relevant amount has been reduced below £1 million as a result of the member having become subject to a pension debit
  5. the member has failed to respond within the given deadline to a notice given by HMRC under paragraph 1 of Schedule 36 to Finance Act 2008 relating to the member and IP 2016.

If HMRC withdraws a member’s IP 2016 they must notify the member to tell them that they have done so and give their reasons for the withdrawal. The member may appeal against the withdrawal of their reference number (see next section).

Appeal against HMRC’s refusal to issue or decision to withdraw an IP 2016 reference number

Paragraph 16 Schedule 4 Finance Act 2016

Where HMRC has refused to accept a member’s application for IP 2016, they must notify the member that their application has been unsuccessful. The member may appeal against this decision to the First-tier or Upper-tier Tribunal as appropriate. The member may similarly appeal against HMRC’s decision to withdraw their reference number.

Where the appeal is considered by the tribunal and relates to the refusal to issue a reference number, the tribunal will allow the appeal if the tribunal is satisfied that:

If the above grounds are not satisfied the tribunal must dismiss the appeal.

If the tribunal finds that HMRC should have accepted the notice then HMRC must issue the member with an IP 2016 reference number.

Where the appeal is considered by the tribunal and relates to the withdrawal of a reference number, the tribunal will allow the appeal if the tribunal is satisfied that the withdrawal was not authorised on the grounds set out at When HMRC may withdraw an IP 2016 reference number.

Notifying subsequent pension debits

Paragraph 18 Schedule 4 Finance Act 2016

An individual must notify HMRC if they receive a discharge notice related to a pension debit - i.e. a notice of discharge of liability in relation to a pension credit corresponding to the pension debit issued under regulation 8(2) or (3) of the Pensions on Divorce etc. (Provision of Information) Regulations 2000 (SI 2000/1048) - at a time when any of the following circumstances apply:

  • the individual has been issued with a reference number following a successful application for IP 2016,
  • the individual has a pending application for an IP 2016 reference number.  A pending application is one where the individual has (a) made an application but does not yet know if it has been successful (i.e. they have not been issued with a reference number) or (b) has not been told their application has been successful on a dormant basis or (c) the application has been unsuccessful but an  appeal is in progress against HMRC’s refusal to issue a reference number (an appeal, including a further appeal, is in progress for so long as it has not been either withdrawn or determined and there is no prospect of further appeal, or
  • an appeal is in progress against HMRC’s decision to withdraw the individual’s FP 2016 reference number.

Where any of the above circumstances apply, the individual must notify HMRC of both the “appropriate amount” of the pension debit (see PTM094100) and the “transfer day” as defined by section 29 Welfare Reform and Pensions Act 1999 or Article 26 of Welfare Reform and Pensions (Northern Ireland) Order 1999 (SI 1999/3147 (NI 11)).

The notice must be given to HMRC within 60 days of the date of the discharge notice related to the pension debit. Notice must be given either using the online facility provided by HMRC for this purpose or by any other means authorised by HMRC in a particular case. The individual may be liable to penalties if they do not notify HMRC within 60 days.

What happens if the member dies before they have made an application for IP 2016?

Paragraph 19 Schedule 4 Finance Act 2016

Where the member dies before making an application for IP 2016, their personal representatives (PRs) are able to do anything in relation to applying for IP 2016 that the member could have done.

So the above guidance applies to PRs in such circumstances. Where the application is being made by the member’s PRs there is a further condition for a valid application (see Conditions required for a valid application for IP 2016) namely that the application must contain the individual’s date of death as well as their date of birth.

If, after the individual’s death, HMRC decides to withdraw a reference number issued to the individual (see When HMRC may withdraw a reference number) they must give the individual’s PRs the notice of, and reasons for, the withdrawal.