Guidance

Pension schemes newsletter 72 - September 2015

Published 28 September 2015

1. Relief at source - annual returns of individual information for 2014 to 2015

In Pension Schemes Newsletters 69 and 71 HM Revenue and Customs (HMRC) reminded scheme administrators of pension schemes operating relief at source that the annual return of individual information for the tax year 2014 to 2015 (also known as RPSCOM100(Z)) is due to be submitted to HMRC by 5 October 2015.

Failure to submit by this date will result in the suspension of any future interim repayments, from November 2015, for schemes covered by that outstanding return. Repayments will only be made once we receive the completed RPSCOM100(Z).

HMRC deem submissions that fail processing as outstanding and any subsequent interim repayments will be stopped pending re-submission.

Over the last year we have been working with scheme administrators to help them submit their annual returns of individual information, however there are still outstanding returns for the 2013 to 2014 tax year.

As such for the 2014 to 2015 annual return of information we will give scheme administrators 3 opportunities to submit this information successfully. This is because it is crucial following the introduction of the Scottish Rate of Income Tax (SRIT) that this information is accurate (see section 2 for more information).

If failure occurs on the third submission we will stop all future interim repayments until a further re-submission is received and is deemed successful.

You can find more information on relief at source repayments and member information we may ask for relating to relief at source at Pension administrators: Relief at Source annual information returns and in the Pensions Tax Manual.

You should already have received a notice to provide information. If you have not received a notice please email: pensions.businessdelivery@hmrc.gsi.gov.uk and put ‘relief at source’ in the subject line of your email.

2. Relief at source - Scottish Rate of Income Tax

The Scotland Act received Royal Assent on 1 May 2012 and from April 2016 the HMRC Income Tax collections systems will be enabled to allow the Scottish Government to levy an element of its own tax (SRIT) from the 2016 to 2017 tax year onwards.

In readiness for the introduction of SRIT, we have been working to ensure that submissions of the RPSCOM100(Z) are made on time and are accurate. This is essential because we will use the data submitted in the RPSCOM100(Z) to identify Scottish taxpayers, and from February 2018 (to be confirmed) notify pension scheme administrators of the correct relief at source rates to apply to their scheme members in the following tax year, so that scheme members receive the correct amount of tax relief.

HMRC intends to introduce a new digital channel for the submission of the RPSCOM100(Z) in 2017. Initially the new digital channel will run alongside the existing methods of submission, however, from 2019, you will only be able to submit this information digitally.

We will continue to work with pension scheme administrators of schemes operating relief at source and will publish more information on relief at source and SRIT over the coming months.

In the meantime if you have any questions or concerns regarding the RPSCOM100(Z) process going forward please email: pensions.businessdelivery@hmrc.gsi.gov.uk and put ‘relief at source - SRIT’ in the subject line of your email.

3. Reminders for pension scheme returns, penalty reminders and payment reminders

In October 2015 we will start to issue Pension Scheme Return (PSR) reminders, payment reminders and penalty reminders to scheme administrators of registered pension schemes. If you are the scheme administrator of a pension scheme which has either an outstanding penalty, payment or PSR you will receive one of these reminders.

You can find details of how to submit the PSR in part 9.2 of our online user guide A Guide to Using the Online Service for Scheme Administrators and Practitioners.

You can also find details of how to pay penalties at Pension scheme administrators: paying tax.

If you receive one of these reminders and are no longer the scheme administrator, if you have already made a payment or if you believe that our records are incorrect then you should write with full details to us at:

Pension Schemes Services
FitzRoy House
Castle Meadow Road
Nottingham
NG2 1BD

4. 2014 to 2015 annual allowance messages

In Pension Schemes Newsletter 71 we asked scheme administrators of registered pension schemes to remind their members that if their pension contributions exceeded the annual allowance (of £40,000) in 2014 to 2015 that they will need to declare this on their Self Assessment Tax Return (the deadline for submitting this is 31 January 2016).

Following this article we received feedback asking us to clarify that when referring to member contributions this includes any:

• relievable pension contribution paid by the member
• relievable pension contribution paid by someone else on behalf of the member
• contribution paid in respect of the member by an employer of the member

A relievable pension contribution includes any basic rate tax relief paid to the scheme by HMRC on the member’s behalf; that is, the gross amount of the contributions. You can find more information in the Pensions Tax Manual.

Your members can use our online tools and calculators to help check whether they need to declare and pay an annual allowance tax charge, even if they haven’t received a pension savings statement.

5. Lifetime allowance reduction and transitional protection

From 6 April 2016 the lifetime allowance (LTA) for tax relieved pension savings will reduce from £1.25 million to £1 million. In Pension Schemes Newsletter 71 we said we would aim to provide further information about the transitional protection on offer. Unfortunately we are not able to provide as much detail as we would have liked.

Legislation for both the reduction in the LTA and the protection regimes (fixed protection 2016 (FP2016) and individual protection 2016 (IP2016)) will be delivered in Finance Bill 2016. As a result it will not be possible for scheme members to apply for protection until after April 2016. This means that individuals cannot notify us of their intention to rely on FP2016 in advance. Individuals who want to rely on FP2016 need to start thinking about what arrangements they need to make to stop accruing benefits after 5 April 2016.

The application process for FP2016 and IP12016 will be online and will require the member (or their authorised representative) to provide similar information and declarations as for FP2014 and IP2014. The online system will provide a response to the notification along with a protection reference number. The member will need to provide this protection reference number to their pension scheme in order to take their benefits using a protected LTA. For these protection regimes, no certificate will be issued.

We hope to be able to provide much more detail on this process both for members and scheme administrators in October 2015.

6. Removal of form APSS161

In Pension Schemes Newsletter 70 we outlined changes to our Pension Schemes Online service. Following these changes you can only pre-register as a scheme administrator or practitioner using the Pension Schemes Online service.

As such we have archived the APSS161 form because this no longer contains the information needed to pre-register as a scheme administrator or practitioner and we are unable to process pre-registrations submitted using this form.

If you need to pre-register as a scheme administrator or practitioner you can find guidance on using the Pension Schemes Online service to do this at Using the Pension Schemes Online service.

7. Finalised regulations

Earlier this year we published 3 sets of draft regulations relating to registered pension schemes for comment. These regulations have now been made and laid and have been published on the www.legislation.gov.uk website:

The Registered Pension Schemes (Provision of Information) (Amendment No 2) Regulations 2015, SI 2015/1455

The Registered Pension Schemes (Audited Accounts) (Specified Persons) (Amendment) Regulations 2015, SI 2015/1518

The Registered Pension Schemes (Transfer of Sums and Assets) (Amendment No 2) Regulations 2015, SI 2015/1454

8. Qualifying Recognised Overseas Pension Schemes

We have received numerous requests to confirm whether an overseas pension scheme is a Qualifying Recognised Overseas Pension Scheme (QROPS). HMRC cannot confirm this for any overseas pension scheme.

To be a QROPS:

i) the scheme must meet the requirements to be a Recognised Overseas Pension Scheme (ROPS)

ii) the scheme manager must notify HMRC that the scheme meets the ROPS requirements and undertake to provide information (to HMRC, other pension schemes and individuals) and to notify HMRC if the scheme ever ceases to be a ROPS

The published list shows that the scheme manager has notified HMRC, wishes to appear on the list and has undertaken to provide information (point ii), but this is all it shows. It does not show that the scheme meets the ROPS requirements (point i).

A scheme’s presence on the list does not guarantee that it is in fact a ROPS. It is the responsibility of the individual and scheme administrator making the overseas transfer to check that the receiving scheme meets the requirements to be a QROPS. UK tax charges will arise if it does not – usually at 55% on the individual and 15% on the scheme administrator.

Checking the published list the day before the transfer will confirm whether the scheme has notified HMRC. It will not confirm that the scheme meets the ROPS requirements. Checks to confirm whether a pension scheme meets the ROPS requirements should be carried out as part of an individual’s and scheme administrator’s due diligence when making a transfer.

9. Pension flexibility

9.1 Pension flexibility - Real Time Information (RTI)

Since April 2015 a number of issues around reporting flexibility payments have been brought to our attention, particularly around the reporting of uncrystallised funds pension lump sums as well as identifying and quantifying flexibly accessed pension payments.

To address this and make it easier to report such payments we are introducing 2 new value fields – ‘taxable amount’ (data item 173) and ‘non-taxable amount’ (data item 174). Where data item 168 is set, details of the taxable and non-taxable elements of the payment should be entered in these fields.

Following our article in Pensions Schemes Newsletter 68 some pension scheme administrators are currently reporting payments related to data item 168 separately under separate payroll IDs or are making payments on different dates under the same payroll ID. From April 2016 you can continue to report in this way but you will also need to use the new data items 173 and 174 to report the value of both the taxable and non-taxable elements of payments.

As you will be aware, data item 168 is currently optional but will become mandatory from 6 April 2016.

9.2 Pension flexibility - taxation of lump sum death benefits

In the Summer Budget 2015 the government announced a change to the pension tax rules to reduce the tax charge that applies to taxable lump sum death benefits paid from registered pension schemes or non-UK schemes to individuals.

From April 2016 this tax charge will reduce from 45% to the recipient’s marginal rate of income tax. You can find further details in the Tax Information and Impact Note and legislation was introduced in the Summer Finance Bill 2015 to amend Finance Act 2004 and the Income Tax (Earnings and Pensions) Act 2003.

You will no longer need to report these payments on the Accounting for Tax (AFT) return, instead from April 2016 these taxable lump sum death benefits must be reported through RTI.

To accommodate this for the tax year starting in April 2016 new RTI data items will be introduced for you to report and quantify pension death benefit payments. Data item 171 ‘Pension Death Benefit’ (similar to data item 168) must be used to identify the type of payment, together with data items 173 and 174 to quantify the taxable and non-taxable elements.

Payments which you will be required to report using new data items 171, 173 and 174 include:

• uncrystallised funds lump sum death benefit
• defined benefits lump sum death benefit
• drawdown pension fund lump sum death benefit
• flexi-access drawdown fund lump sum death benefit
• annuity protection lump sum death benefit
• pension protection lump sum death benefit

You will be required to report payments of income withdrawal from the following funds using the new data items:

• dependant’s drawdown pension fund
• dependant’s flexi-access drawdown fund
• nominee’s flexi-access drawdown fund
• successor’s flexi-access drawdown fund

You will also be required to report income payments from the following annuities using these new data items where the member died on or after 3 December 2014:

• dependant’s annuity
• dependant’s short-term annuity
• nominee’s annuity
• nominee’s short-term annuity
• successor’s annuity
• successor’s short-term annuity
• lifetime annuity with a guarantee period that has not ended on the individual member’s death

Payments made to trusts will continue to be liable to the special lump sum death benefits charge at 45% and should be reported on the AFT.

9.3 Pension flexibility - forms for claiming repayment of tax

In Pension Schemes Newsletter 70 we asked you to remind your members that the P50Z, P53Z and P55 forms should only be used for reclaiming tax on pension flexibility payments.

We are still seeing instances where these forms are being used to reclaim tax on payments which don’t relate to pension flexibility.

Please remind members again that these forms should only be used to reclaim tax deducted from pension flexibility payments. In addition we are unable to process forms P50Z and P53Z forms without the member’s P45.

If as scheme administrators you have any questions or feedback on pension flexibility please email: pensions.businessdelivery@hmrc.gsi.gov.uk and put ‘Pension flexibility’ in the subject line of your email.