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HMRC internal manual

Pensions Tax Manual

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HM Revenue & Customs
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Information and administration: payment of tax reported on the Accounting for Tax return (AFT) and what happens if the tax is paid late

Glossary PTM000001
   

 

When is payment due?
Who is responsible for paying the tax?
How to pay the tax due
Who to contact if you have a question about a payment
AFT return filed but tax not paid
Interest on late payments
Penalties on late payment

 

Section 254 Finance Act 2004

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

When is payment due?

Payment of the

  • short service refund lump sum charge
  • lifetime allowance charge
  • special lump sum death benefits charge
  • serious ill-health lump sum charge (charge only applied to lump sums paid before 16 September 2016)
  • authorised surplus payments charge, and
  • de-registration charge

is due 45 days after the end of the quarter in which the event triggering the tax charge takes place. This tax payment date is the same as the AFT filing date. The tax due is payable without the need for HMRC to issue an assessment for the tax due.

Section 254(7A) Finance Act 2004 & Paragraph 33 Schedule 17 Finance Act 2011

Payment of the annual allowance charge by the scheme administrator for a tax year is due to be reported in the AFT return for 31 December of the year following the year in which the tax year ended. For example, an annual allowance charge for the tax year 2014-15 would be reported in the AFT return for 31 December 2016. The tax is due by 14 February following the relevant 31 December quarter.

For tax year 2011-12 only the deadline was extended so that the annual allowance charge could be reported on the AFT return for the quarter ending 31 March 2014. This means that the tax needed to be paid by 15 May 2014.

However if the scheme administrator chooses to record payment of the annual allowance charge on the AFT return for an earlier quarter the tax is due 45 days from the end of that quarter.

Example

Fiona has an annual allowance charge of £3,500 due in 2012-13. Fiona tells her pension scheme that she wants the scheme administrator to pay the tax and adjust her benefits under the scheme. Fiona’s scheme receives the notice telling them this on 15 July 2013. The pension scheme administrator records the tax due on the next AFT return due - that is for the quarter ending 30 September 2013. This AFT return must be filed, and the annual allowance charge paid, by 14 November 2013.

Fiona’s scheme administrator could have delayed recording details of the annual allowance charge until the AFT return for the quarter ending 31 December 2014 and then have until 14 February 2015 to pay the tax. As the scheme administrator recorded details of the annual allowance charge due on an earlier AFT return the tax has to be paid 45 days after the end of that AFT quarter - 14 November 2013. If the tax is not paid by 14 November 2013 late payment penalties will be due.

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Who is responsible for paying the tax?

The same person who is responsible for filing the AFT return is responsible for paying the tax due. This will usually be the scheme administrator but anyone can pay the tax due on behalf of the scheme administrator.

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How to pay the tax due

There are a number of ways in which you can pay HMRC. Guidance on how to make payments to HMRC can be found on the gov.uk website, ‘pension scheme administrators paying tax’.

When making the tax payment the scheme administrator should include the charge reference number. This enables HMRC to match the payment to the AFT return. If payment is made without quoting the charge reference the scheme administrator may get payment reminders and assessments because HMRC has not been able to match the tax payment to the AFT return.

The charge reference (also sometimes called a payment reference) is given when the AFT return has been successfully submitted. It is made up of three letters beginning with X, followed by 11 numbers.

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Who to contact if you have a question about a payment

If you have a question about a payment you should contact HMRC Accounts Office - see https://www.gov.uk/government/organisations/hm-revenue-customs/contact/miscellaneous-payments-teams.

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AFT return filed but tax not paid

Where the AFT return has been filed but tax has not been paid a payment reminder will be issued to the scheme administrator. This payment reminder will be issued:

  • seven days after the payment due date where the AFT return was filed on time, or
  • seven days after the AFT return was filed if it was not filed on time.

The amount shown on the payment reminder will be the amount of tax outstanding plus interest for late payment.

If the tax continues to be unpaid HMRC will raise an assessment to collect the tax and interest due.

HMRC needs the charge reference with the tax payment to match up the tax payment with the scheme administrator’s AFT return. If a payment is made without quoting the charge reference payment reminders and assessments can be issued even though the tax has been paid.

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Interest on late payments

Interest is charged on any tax paid late. See the gov.uk website for details of the interest charge.

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Penalties on late payment

Schedule 56 Finance Act 2009

The Finance Act 2009, Schedule 56 (Appointed Day and Consequential Provisions) Order 2010 - Statutory Instrument 2010/466

Penalties are due for late payment of tax charges listed above due on or after 14 October 2010. That is tax charges that arise in the quarter ending 30 September 2010 and any subsequent quarter. Penalties for late payment do not kick in until the tax payment is over 30 days late. Penalties are due in addition to interest for late payment.

Where the tax is paid over 30 days from the due date the penalty is 5 per cent of the unpaid tax 30 days after the due date.

Where tax has still not been paid six months after the due payment date a further penalty is due. This is 5 per cent of the tax outstanding at the six month point.

Where tax is still not paid 12 months after the due payment date a further penalty of 5 per cent of the outstanding tax is due.

So if, for example, tax of £2,500 was due to be paid on 15 May 2011 but is not paid until 20 November 2011 the following penalty for late payment would be £250 made up of

£125 penalty (5 per cent of the £2,500 tax due) because the tax payment is more than 30 days late, and

Another £125 penalty (5 per cent of the £2,500 tax due) because the tax payment is more than 6 months late.

For more details, see the Compliance Handbook from CH154000 .

Paragraph 9 Schedule 56 Finance Act 2009

HMRC has the ability to reduce a penalty for late filing or for late payment of tax. But this can only be done if:

  • there is a reasonable excuse (find full details in the Compliance Handbook from CH155500, or
  • there are special circumstances.

HMRC will consider if a penalty should be reduced on the facts of each case, as they arise (not beforehand). However the following will not be considered ‘special circumstances’:

  • the inability of the scheme administrator to pay
  • the fact that the loss of tax from one taxpayer is balanced by tax from another taxpayer
  • the fact that penalties arise due to both late filing of the AFT and late payment of the tax due

Full details of ‘special circumstances’ are at the Compliance Handbook from CH170000.