Guidance

Newsletter 147 — February 2023

Published 28 February 2023

1. Relief at Source — look up service

You can check your members’ residency status for relief at source using the look up service. You can check the residency tax status for single or multiple members or default to the UK basic rate for your members.

The service has been updated so if you have a Government Gateway ID and password for a scheme administrator ID beginning with ‘A2’ or a practitioner ID beginning with a ‘2’, you will now also be able to use the service.

You should use this service to check a member’s residency status if they:

• do not appear on your notification of residency status report
• were shown as unmatched on your notification of residency status report

Use the rest of UK residency status if:

• you cannot check a member’s status before you apply for relief at source for them
• they do not appear on either the residency report or the look up service

You must not apply a tax rate based on the member’s address.

Once you have used a residency status to claim relief at source for a member, you must use this for the whole of the tax year, even if their residency status changes.

2. Public service pension remedy — regulations

In 2015, all main public service pensions were reformed. These reforms included ‘transitional protection’ for people closer to retirement. In 2018, the Court of Appeal ruled that this directly discriminated against some younger pension scheme members. The government confirmed that the difference in treatment would be remedied across all of the public service pension schemes.

The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 setting out the changes to pensions tax treatment arising from the remedy in Part 1 of the Public Service Pensions and Judicial Offices Act 2022, have now been made and laid. They aim to smooth the implementation of that remedy.

There will be further publications of regulations covering different topics.

3. Accounting for Tax (AFT) Returns

3.1 Changes to Accounting for Tax

In Pension Schemes Newsletter 146 we explained some changes that will be made to Accounting for Tax for all quarters beginning 1 April 2023 onwards, that will apply to pension schemes impacted by the public service pensions remedy (also known as the ‘McCloud judgment’).

We can now provide more information on the changes.

Annual allowance charges

Where, as a result of the public service pensions remedy the member has a new or additional annual allowance tax charge to pay the member may be able to use mandatory scheme pays.

If a member makes a scheme pays election for this extra charge, provided it is made in time it will be treated as a mandatory election, even if the pension input amount for your scheme is not more than £40,000 or the member’s annual allowance charge is less than £2,000.

Where a member asks you to pay a new or additional annual allowance tax charge, this charge must be reported on the Accounting for Tax return for the quarter following the quarter in which you receive the new scheme pays election. For example, an election received on 30 September would require any additional annual allowance tax charge to be reported on the Accounting for Tax return for the quarter ending 31 December.

There will be new questions on the Accounting for Tax asking for the following details:

1. Is this annual allowance charge being paid as a result of the public service pensions remedy?
2. If ‘yes’: is this an addition to a previously reported annual allowance charge for this member?
3. If ‘yes’: was the original charge paid by another pension scheme?
4. If ‘yes’: provide the Pension Scheme Tax Reference (PSTR) of the relevant pension scheme (you’ll be able to add up to 5).

For each Pension Scheme Tax Reference entered, or if the answer to question 3 is no, the following details will need to be entered:

• What was the period that the original annual allowance charge was reported and paid for?
• What was the amount originally reported for the annual allowance charge?

Lifetime allowance charges

Some members may be subject to an increased lifetime allowance charge as a result of the public service pension remedy and may need to report and pay extra tax. This charge will need to be reported on the Accounting for Tax return.

You’ll need to report the extra, or new, lifetime allowance charge on the Accounting for Tax return for the quarter following the quarter in which you became aware of the change in the benefit crystallisation event. For example, an election received on 30 September would see an additional lifetime allowance tax charge reported on the Accounting for Tax return for the quarter up to and including 31 December.

There will be new questions on the Accounting for Tax asking for the following details:

1. Is this lifetime allowance charge being paid as a result of the public service pensions remedy?
2. If ‘yes’: is this an addition to a previously reported lifetime allowance charge for this member?
3. If ‘yes’: was the original charge paid by another pension scheme?
4. If ‘yes’: provide the Pension Scheme Tax Reference (PSTR) of the relevant pension scheme (you’ll be able to add up to 5).

For each Pension Scheme Tax Reference entered, or if the answer to question 3 is no, the following details will need to be entered:

• What was the period that the original lifetime allowance charge was reported and paid for?
• What was the amount originally reported for the lifetime allowance charge?

For pension schemes impacted by the public service pensions remedy, as a result of the new questions, the bulk upload CSV templates will change for annual allowance and lifetime allowance. If you would like us to send you the updated spreadsheets when they’re available email pensions.administration@hmrc.gov.uk and put ‘Updated AFT CSV file’ in the subject line.

For any pension schemes not impacted by the public service pension remedy, you can continue to use the existing CSV templates. When the new questions are available on the Accounting for Tax return, you’ll be given the option of both versions of the CSV templates.

Both versions of the template will be available on the Managing Pension Schemes service from 1 April 2023.

3.2 Accounting for Tax — system downtime

Due to the updates being made to the Accounting for Tax return, from 4pm on Friday 10 March 2023 to 9am on Thursday 16 March 2023 the functionality to compile or submit an Accounting for Tax return on the Managing Pension Schemes service will be unavailable. You can find further information on HMRC service availability on GOV.UK.

If you need to make a payment during this time, you can use the Pension Scheme Tax Reference as the reference.