PAYE94045 - Reconcile individual: in-year reconciliation: small pension taken as a lump sum payment (formerly known as trivial commutation payments)

For in-year repayment claims in respect of higher rate tax deducted from lump sum payments, see the guidance included within action guide ‘Request for in-year repayment on receipt of redundancy payment’ which is available on the Personal Tax Operations Guidance Gateway.

For in-year repayment claims in respect of pension flexibility, refer to PAYE94055

For in-year repayment claims in respect of Lump sum death benefit, refer to PAYE94058

The ‘small pension taken as a lump sum repayment calculation’ (formerly known as ‘Trivial commutation repayment Calculation) (Action Guide)’ has been replaced by action guide ‘Request for in-year repayment – P53 / P53(Z) / P53Z(DB) / P55 / P55(DB)' which is available on the Personal Tax Operations Guidance Gateway.

In-year repayment requests

Many individuals who receive small pensions taken as a lump sum payment will have little or no other taxable income and because

• From 6 April 2013 all new small pensions taken as a lump sum that are not yet in payment will be taxed at Basic Rate (BR) on a non cumulative basis
  And
• All lump sums taken on pensions that are already in payment will be taxed using the tax code that is already in place

the tax deducted from the small pension taken as a lump sum payment may exceed the actual liability.

In these circumstances, an early repayment of excess tax deducted from the small pension taken as a lump sum payment can be made to the individual.

Where the individual has a live SA interest, from 6 April 2009 an in-year repayment can be made. Any repayment due should be entered on the SA record using SA Function CREATE FREESTANDING CREDIT. The return for the year should be processed in the usual way after the end of the year when it has been returned. This also applies to individuals that have a PAYE source and an SA interest.

The form P45 will tell the individual to ask for form P50 to request a repayment. This form however, will not be appropriate when an in-year payment is requested because the individual may not be able to sign the relevant declaration. You should therefore establish why the individual thinks that a repayment is due.

If the reason for requesting a repayment is because of a small pension taken as a lump sum payment, use form P53 (this form replaces forms P53A and P53B), which is available on SEES Forms and Letters and the HMRC Website, so that these individuals can provide us with details of their other income. The form is used to provide estimated details of income, during the year, for early repayment.

Note: When making an in-year repayment in a small pension taken as a lump sum case, estimated figures can be used if there are any open employments.

Form P53 recognises that the information will be estimated for in-year repayments and the year will be reconcilied after the end of the tax year. The individual must sign the declaration on the form, and return it along with forms P45 Parts 2 and 3, which are required before any repayment can be made.

When you issue form P53 to the individual you must ask them to return it to Personal Tax, HM Revenue and Customs, BX9 1AS.

P53 claims using estimated income near the end of the tax year

P53 claims received leading up to and shortly after the end of the tax year should be dealt with as normal using the estimated figures that have been provided. This will avoid delays in the individual receiving their repayment and will avoid any unnecessary contact with the employer.

P53 claims with a live employment source

A P53 claim can be actioned during a tax year when there is a live employment.  Please ensure the estimated pay is entered for all open employments.

At the end of the year

With effect from 6 April 2013 there is no longer any need to issue an end of year P53 review form. All cases will now be reviewed by the Auto Reconciliation process.

P53 request from a non-resident

If the individual is a non-resident, you must not issue a form P53 as this does not contain enough information to deal with the claim. If the individual contacts you, refer to PAYE81000.