PTM162100 - Information and administration: the Accounting for Tax return: essential principles
Glossary PTM000001
The Accounting for Tax return (the AFT return)
Responsibility for submitting the AFT return
When the AFT return is due
How to file the AFT return
What happens if the AFT return is not filed on time
What happens if the information given on the AFT return is not correct
Section 254 Finance Act 2004
The Accounting for Tax return (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 (AFT 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 (to the 5 April 2023)- see PTM083000,
- the special lump sum death benefits 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 overseas transfer charge – see PTM102200,
- the authorised surplus payments charge - see PTM145200, and
- the de-registration charge - see PTM033300.
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 de-registered is responsible for filing the AFT return and paying the tax due.
A practitioner can file the AFT return 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 return 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.
- 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.
- 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.
When the AFT return is 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 AFT 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.
An AFT return needs to be completed only if one or more of the tax charges listed above has arisen in a quarter. An AFT return should not be completed if none of these tax charges have arisen in a quarter.
Paragraph 25(5) Schedule 4 Finance Act 2017
Where the transfer that triggered liability to the overseas transfer charge was made before 1 July 2017 liability to the overseas transfer charge should be reported on the AFT return for the quarter 1 July 2017 to 30 September 2017.
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.
For more information on how to pay the tax due go to PTM162300.
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 the Managing Pension Schemes service for any quarter from 1 April to 30 June 2020 onwards. A new AFT return for quarter 1 January to 31 March 2020 or earlier 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 the Managing Pension Schemes service or Pension Schemes Online.
A paper AFT return is not valid. If a paper AFT return is sent to HMRC the legislation treats it as not having been delivered.
Amendments to the AFT return must also be filed electronically via the Managing Pension Schemes service or Pension Schemes Online (where the AFT return was submitted on that system).
PTM162200 sets out what information is needed to submit an AFT return.
What happens if the 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 when the AFT return was due to be filed.
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 return 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 return is filed, the amount of tax due and the behaviour of the scheme administrator. CH60000 provides guidance on the penalties due for failing to file the AFT return 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 the 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 RPSM12301300.
What happens if the information given on the 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 it is discovered, for whatever reason, that an individual was left off an AFT return, the AFT return for the quarter in which the tax charge actually arose needs to be amended. The individual should not simply be added to the next AFT return that is filed.
The amendment will need to be made on the system the AFT return was submitted on, either Pension Schemes Online or Managing Pension Schemes service.
Each time an amendment is made to an AFT return submitted on the Managing Pension Schemes service that increases the amount due to HMRC, a new charge reference is created. The scheme administrator will be able to view this on the scheme's 'financial information' part of the Managing Pension Schemes service.
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.