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HMRC internal manual

Pensions Tax Manual

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HM Revenue & Customs
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Information and administration: the Accounting for Tax return: essential principles

Glossary PTM000001
   

 

What is the AFT return?
Responsibility for submitting the AFT return
When is the AFT return due?
How to file the AFT return
What happens if the Accounting for Tax (AFT) return is not filed on time
What happens if the information given on the Accounting for Tax (AFT) return is not correct?

 

Section 254 Finance Act 2004

What is the AFT return?

Under Part 4 Finance Act 2004 the scheme administrator is liable for payment of certain tax charges in connection with the scheme. If more than one person is appointed as scheme administrator, each is jointly and severally liable for any tax charges or penalties.

The scheme administrator must make returns to HMRC of the income tax to which they are liable under Part 4 Finance Act 2004. When a scheme administrator does have a tax liability, the return that the scheme administrator must complete to account for that liability is called the Accounting for Tax return.

The tax charges that need to be reported on the AFT return are:

  • the short service refund lump sum charge - see PTM045000,
  • the lifetime allowance charge - see PTM083000,
  • the special lump sum death benefit charge - see PTM073010,
  • the serious ill-health lump sum charge (from 6 April 2011 to 15 September 2016) see PTM063400,
  • the annual allowance charge where the scheme pays the member’s charge - see PTM056400,
  • the authorised surplus payments charge - see PTM145200, and
  • the de-registration charge - see PTM033300.

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Responsibility for submitting the AFT return

The scheme administrator is responsible for making the AFT return and for ensuring it is correct and complete. If a pension scheme is de-registered the person(s) who was the scheme administrator immediately before the scheme was deregistered is responsible for filing the AFT and paying the tax due.

A practitioner can file the AFT on behalf of the scheme administrator but the scheme administrator remains responsible for ensuring that it is submitted on time and the contents are correct. Where a practitioner submits the AFT the scheme administrator should have seen and approved its content before it is submitted to HMRC. The practitioner must make a declaration that the scheme administrator has approved the contents before they can submit it to HMRC.

The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 - SI 2006/569

Where the scheme is a split scheme the sub-scheme administrator is responsible for filing the AFT return and paying the tax due for their sub-scheme. The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 specifies which schemes are split schemes, how they are split into sub-schemes and who the sub-scheme administrator is.

The Pension Benefits (Insurance Company Liable as Scheme Administrator) Regulations 2006 - SI 2006/136

An insurance company will be responsible for filing an AFT return if both the following conditions are met.

  1. The annuity or insurance contract is not owned by a registered pension scheme but was purchased from funds held by such a scheme. Payments under the contract are treated as if made from a registered pension scheme by virtue of section 161(3) & (4) Finance Act 2004. An example of this situation is where an annuity is purchased by the scheme ‘in the name of the member’. The annuity contract is not owned by the scheme but by the member. Payments under the annuity will be treated as if made from the registered pension scheme that purchased the contract.
  2. One of the following payments is made under the annuity or insurance contract:
* a pension protection lump sum death benefit,
* an annuity protection lump sum death benefit,
* a drawdown pension fund lump sum death benefit, or
* a flexi-access drawdown pension fund lump sum death benefit.

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When is the AFT return due?

Most of the scheme administrator liabilities are triggered on the making of certain payments by a registered pension scheme. The making of those payments determines when the return must be made. The exception is when a scheme has its registration withdrawn, when the liability is triggered on the withdrawing of that registration.

The AFT return is a quarterly return. The quarters are:

  • 1 January to 31 March
  • 1 April to 30 June
  • 1 July to 30 September
  • 1 October to 31 December.

You only need to complete an AFT return if one or more of the tax charges listed above has arisen in a quarter. Do not complete an AFT return if none of these tax charges has arisen in a quarter. The AFT return should be submitted to HMRC before the end of 45 days following the end of the relevant quarter with payment of the scheme administrator tax charges listed due at the same time. So for tax charges arising in the period:

  • 1 January to 31 March the AFT return should be filed no later than 15 May
  • 1 April to 30 June the AFT return should be filed no later than 14 August
  • 1 July to 30 September the AFT return should be filed no later than 14 November
  • 1 October to 31 December the AFT return should be filed no later than 14 February.

If the pension scheme has wound up the time limit for filing the AFT becomes three months from the date of completion of winding up if this is earlier than the normal AFT filing date.

For more information on how to pay the tax due go to PTM162300.

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How to file the AFT return

Regulations 4 & 6 The Registered Pension Schemes and Overseas Pension Schemes (Electronic Communication of Returns and Information) Regulations 2006 - SI 2006/570

The AFT return must be submitted electronically using Pension Schemes Online. The scheme administrator will not have met their obligation to file an AFT return until submission has been accepted by Pension Schemes Online.

You cannot submit a valid paper AFT return. If you do send a paper AFT return to HMRC the legislation treats it as not having been delivered.

Amendments to the AFT return must also be filed electronically via Pensions Schemes Online.

More information on how to submit an AFT return can be found on the gov.uk website in the Guide to using the Online Service for scheme administrators.

PTM162200 tells you what information is needed to submit an AFT return.

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What happens if the Accounting for Tax (AFT) return is not filed on time

Penalties are due where the AFT return is not filed on time. The amount of the penalty depends on the quarter period of the AFT return and when it is submitted.

There are separate penalties on the scheme administrator if the tax due to be paid with the AFT return is not paid on time. The late payment penalties can apply whether or not the AFT has been filed on time. PTM162300 provides guidance on what these penalties are.

Schedule 55 Finance Act 2009

The standard late filing penalties apply to these returns. The amount of penalty depends on how late the AFT is filed, the amount of tax due and the behaviour of the scheme administrator. CH600000 provides guidance on the penalties due for failing to file the AFT on time.

HMRC has the ability to reduce a penalty only if:

  • there is a reasonable excuse (see CH61500), or
  • there are special circumstances (see the Compliance Handbook from CH170000.

Different penalties applied to AFT returns for period ending 31 December 2010 and earlier. Guidance on the penalties for these earlier periods can be found in the archived version of RPSM held on the National Archives website at:

http://webarchive.nationalarchives.gov.uk/*/http://hmrc.gov.uk/manuals/rpsmmanual/RPSM12301300.htm.

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What happens if the information given on the Accounting for Tax (AFT) return is not correct?

An AFT return may show incorrect information for a number of reasons. For example the scheme administrator may have reported that the lifetime allowance charge is due for a particular member. The scheme administrator later finds that the member had lifetime allowance protection and so no lifetime allowance charge is actually due.

Whatever the reason for the error the scheme administrator needs to amend the AFT return for the quarter in which the tax arises as soon as they discover a mistake has been made. If you discover, for whatever reason, an individual was left off an AFT return you need to amend the AFT return for the quarter in which the tax charge actually arose. Do not simply add the individual to the next AFT return that is filed.

If:

  • an amendment is being made to an AFT return that was originally submitted before 6 April 2011 and
  • it relates to an individual liable to the lifetime allowance charge already reported on the AFT return

the scheme administrator does not have to provide the member’s National Insurance number (NINO). If the scheme administrator did not originally give the individual’s NINO and now wishes to supply it they can do so - but they don’t have to. To enter the NINO using Pension Schemes Online the scheme administrator will need to delete the individual’s date of birth before submitting the amendment to the AFT return.

Penalties for incorrect information

Schedule 24 Finance Act 2007

The Finance Act 2008, Schedule 40 (Appointed Day, Transitional Provisions and Consequential Amendments) Order 2009 - SI 2009/57

For AFT returns for quarters ending 31 March 2010 onwards a penalty is due on the scheme administrator if the AFT return understates the amount of tax actually due, and

  • the inaccuracy was deliberate or
  • the scheme administrator did not take reasonable care in completing the AFT return, or
  • the scheme administrator discovers they have made mistake on the AFT return and does not take reasonable steps to tell HMRC about the mistake.

The amount of the penalty depends on the behaviour of the scheme administrator.

The legislation governing these penalties covers many taxpayers and types of tax. The detailed guidance on the operation of this legislation can be found in the Compliance Handbook from CH80000.