Personal Finance Society news update from 3 August to 16 August
2016 on taxation, retirement planning and investments.
Taxation and Trusts
TAXATION AND TRUSTS
The cost of tax reliefs is put under
(AF1, AF2, RO3, JO3)
The National Audit Office (NAO) has called for more scrutiny of
tax reliefs generally and specifically the capital gains tax relief
which is available to people selling their main home and apparently
costs the exchequer £18bn a year.
The NAO said that monitoring of tax reliefs was "not yet
systematic or proportionate to their value or the risks they
carry". "Reliefs reduce tax bills and may be exploited or
used in ways which parliament did not intend," it said.
Altogether, tax reliefs cost more than the budget of any
government department and MPs, lawyers and think-tanks have
questioned their effectiveness and value for money.
The cost of exempting main residences from capital gains tax
rose from £10.5bn to £18bn in the four years to 2015/16 as house
prices went up. It was the biggest factor in a 13 per cent
rise in the cost of reliefs - to £117bn - during the past four
The NAO said the £1.7bn increase in the cost of principal
private residence relief between 2014/15 and 2015/16 had not been
explained by HM Revenue & Customs and the costs were not
monitored by its policy team.
It said there was scope for the misuse of the relief, given its
scale, the complexity of the rules and the lack of reporting
requirements. It noted that the number of buy-to-let
landlords had risen significantly in recent years and said the
eligibility rules for the relief were not always
straightforward. "There are several restrictions and related
reliefs which allow individuals to claim relief for two homes
concurrently. This means more scrutiny may be needed to
ensure people are following the rules correctly," the NAO said.
HMRC said the rise in the cost of the relief was because house
prices had gone up and there have been more sales. It said:
"We ensure the right capital gains tax is paid through reviewing
the data we hold and cross-checking it against third-party
We also carry out targeted campaigns … where we use our own
analysis to reach people we believe should have declared a gain but
did not, and to raise awareness about the rules."
The NAO said it had found examples of good practice in the way
HMRC monitored the cost of reliefs though. It said specialist
units checked all claims concerning the "patent box" (a tax relief
on profits from intellectual property), creative industry reliefs,
including breaks for makers of high-end television shows, and
venture capital schemes.
HMRC had been able to detect unusual changes in the costs of
these reliefs and respond in cases where it monitored costs over
The NAO said the sheer number of tax reliefs meant it would be
impractical for HMRC to administer each one individually, adding
that in many cases the costs of doing so could outweigh the
HMRC recognised the need to take a risk-based approach to manage
reliefs proportionately and had introduced new guidance that
focused on new tax reliefs, which tend to carry greater uncertainty
But the NAO warned that older tax reliefs could present risks
too. It said that "changing trends can lead to increased
take-up or they can become the focus of tax avoidance schemes".
Worryingly for business owners, the NAO said HMRC was planning
an extensive review of entrepreneurs' relief. The use of so
called "money boxing" has already been the subject of debate and
The NAO had previously raised concerns that entrepreneurs'
relief was costing three times more than expected, although the
government has since introduced changes to reduce its cost and it
is understood that there is no general HMRC concern about the
fundamental principle of the relief- some form of which has been
available for many years.
The fundamental point underlying the NAO concern is that there
should be a very regular "cost/benefit" analysis applied to tax
reliefs. It is hard to argue with this principle.
Tax reliefs are generally introduced in order to change taxpayer
behaviour. A regular assessment of whether targeted
behavioural changes have been secured or not seems essential given
the cost of many reliefs.
The cost of pensions tax relief (>£30bn) has had very high
publicity over the past year or so. The Centre for Policy
Studies clearly had this very much in mind in making their
recommendations for an alternative means of pensions saving in
their "ISA Centric Savings World" document.
Higher rate taxpayers hit record levels
According to HMRC and the Institute for Fiscal Studies (IFS) the
number of Britons paying income tax at the higher or additional
rate is estimated to have reached a record 5m people last year as
the UK's tax revenues become increasingly reliant on high-income
HMRC data shows that increasing numbers of people are being
swept into higher and additional rate tax bands, where they pay
income tax at 40 per cent and 45 per cent respectively.
However, the statistics also show that more than a million fewer
people will pay income tax this year than they did when the
coalition government came to power, although low-paid workers are
still caught in the net of National Insurance contributions.
It was the Liberal Democrat party pledge in 2010 - that proved
so popular that the Conservatives adopted it as their own - to
raise the personal allowance and take millions out of tax
And it has an effect: 31.3m people paid income tax in 2010/11,
but this year, just 30.1m will. Without the discretionary
increases in the personal allowance introduced by the coalition and
Conservative governments, the figure would instead have risen
This means that there are now 23m adults in the UK whose income
is sufficiently low that they do not pay income tax. A third
of men and half of women will pay no income tax at all this
But a significant minority of these still have to pay National
Insurance contributions. These are people earning between
around £8,000 and £11,000 and aged under the state pension
age. The Institute for Fiscal Studies estimated that there
were a minimum of 1.2m people in this situation in 2014.
Income tax revenues of £182bn are expected to be collected in
2016/17, according to forecasts from the Office for Budget
Responsibility, meaning that each person who pays income tax will
pay an average of just over £6,000. But, in reality, the
payments are far from evenly distributed. Revenues are very
reliant on the behaviour of a relatively small number of
The top 10 per cent of people who pay income tax - people with
annual income in excess of £54,300 - receive a third of total
income, but pay almost three-fifths of the tax. This is part
of a wider trend towards greater reliance for tax revenues on a
small group of wealthy, high-income individuals.
While the total number of people paying income tax has fallen
over recent years, there has been growth in the number of people
aged 65 or over who pay income tax - rising from 4.9m in 2010/11 to
5.9m this year - while the number of people aged under 65 who pay
income tax has fallen from 26.4m to 24.1m. This partly
reflects the UK's ageing population - there are now 1.6m more
people aged 65 and over than there were six years ago - but it also
reflects the fact that pensioner incomes have been growing
significantly faster than those of working age households in recent
The above-mentioned "top 10% of taxpayers" are more likely to
need and want financial advice - and, importantly, have the means
to pay for it - regardless of the way that payment is
It's an undeniable fact that the more intense and meaningful a
problem (like tax) becomes, the more interested an individual will
be inlegitimatelyavoiding it.
The italicised "legitimately" is especially important to
emphasise as very few now will want to enter into aggressive
schemes that will eventually lead to conflict with HMRC -
regardless of the level of "tax pain" suffered.
The world has changed indeed.
No emergency budget
(AF1, AF2, AF3, AF4, JO2, JO3, JO5, RO3, RO4, RO8,
Philip Hammond, the new Chancellor, has stated clearly that
there will be no post-referendum "emergency Budget". Instead,
as further evidence of his (and the new Prime Minister's)
commitment to restoring calm, he has said that the government will
be following the normal Autumn Statement and Spring Budget
Early indications are that this may see a move away from an
austerity-based fiscal programme. Self- evidently, developments
between now and the Autumn Statement will have a very strong
influence on the direction that will be taken.
By all accounts, though, the new Chancellor will be more
"inclusive" and less prone to "rabbit out of a hat" policies and
We shall see…
Increase in the number of estates subject to
(AF1, AF2, JO2, RO3)
House prices boost inheritance tax receipts (especially in
London and the South East). Estates in London and the south east
paid almost half of the country's inheritance tax bill in 2013/14
because of rising house prices, which means an increasing number of
people are being hit by (and potentially interested in planning
for) IHT- especially in that part of the country.
The data shows that London and the south east contributed 49 per
cent of IHT collected during the year to April 2014 according to HM
Revenue & Customs (HMRC).
Official forecasts also suggest the proportion of estates liable
for IHT will reach 8.3 per cent of all estates in 2014/15.
This is the first time since 1976 that the proportion of estates
subject to IHT has risen above 8%.
Properties, household savings and stocks, bonds and other
financial securities make up the bulk of assets on which
inheritance tax is levied. Among all estates that paid
inheritance tax in 2013/14, 36 per cent of assets were held in UK
housing and 30 per cent in securities.
The £4.8bn that the government is set to raise from IHT this
year is, however, a tiny fraction of forecast total tax receipts of
£716.5bn, according to OBR forecasts.
The amount of IHT, as a proportion of the overall yield from all
taxes, is very low. IHT does, however, generate a strong emotional
response from those whose families may have to pay it. People see
it as a form of "double taxation" to the extent that it represents
tax on assets that are or were acquired by income that suffered
income tax. Whenever there is a strong emotional resistance to a
tax the motivation to "do something about it" will be higher.
Making individuals aware of what IHT can do to the family's net
wealth and then explaining what can be done about it is a key part
of the financial planner's role with those of their clients for
whom IHT could be an issue. While, at 8%, the proportion of estates
subject to IHT appears relatively low, the proportion of clients of
advisers whose estates are likely to be subject to IHT will be
Those where residential property is the main driver of the
liability may well be interested in protection policies in trust to
meet the liability. This is because effective planning to
reduce the liability using residential property is in relatively
short supply given the relative effectiveness of the gift with
reservation and pre-owned assets tax provisions. To the
extent that the liability is generated by cash and investments, the
options for planning increase.
Tried and tested strategies founded on trusts, such as loan
schemes and discounted gift arrangements, can deliver IHT reduction
with continuing access and control for the settlor.
Especially given that it seems likely that both of these scheme
types will remain outside of the (soon to be extended) Disclosure
of Tax Avoidance Scheme (DOTAS) provisions this makes them
potentially very attractive to many clients of advisers who are
concerned about IHT but cautious about outright gifting - or even
simply gifting into trust.
A variation of trust case recognises the rights of
(AF1, RO3, JO2)
In what is believed to be the first case of its kind, the High
Court has approved a variation of a 51-year old trust to allow
same-sex spouses and civil partners to acquire the same inheritance
rights over property that are afforded to opposite sex spouses of
descendants of the settlor under the terms of the trust.
The terms of the trust in question, as originally drafted, were
"much in the style of a 19th century dynastic family settlement"
which did not include civil partners (naturally) or spouses under
same-sex marriages. The Pembertons, who have lived in Trumpington
Hall, Cambridgeshire, for three centuries, said they felt they had
"a moral obligation" to future generations to modify the inheritance arrangements over their ancestral
The variation, which ensures that future same-sex spouses and
civil partners will have a life interest in Trumpington Hall
following the death of their spouse, was approved on the basis that
it would "be for the benefit of the family as a whole and therefore
of benefit to each individual member" in the words of the
It is believed that the Pembertons are the first landed gentry
to alter the definition of a 'spouse' in a pre-existing trust to
ensure that it recognises same-sex marriages and civil
The trust's lifespan was also increased for another 125 years,
to 2141, and additional investment powers were conferred on the
The case highlights the progressive attitude of the Courts
towards outdated family settlements that have not kept pace with
changes to the law.
Personal portfolio bond consultation
(AF4, CF2, RO2, FA7)
At the 2016 Budget it was announced that the government would
review the categories of permitted investments which could be held
in a life assurance bond without it becoming taxable as a personal
HMRC has now launched a consultation which invites views on the
current property categories and further property types which may be
held within the bond.
Broadly, there are three types of investment vehicle which are
being considered to be included within the permitted category list.
- real estate investment trusts (both UK and foreign
- overseas equivalents of UK approved investment trusts; and
- UK authorised contractual schemes.
The government is keen to hear from interested parties,
especially policyholders and their representatives, members and
representatives of the life assurance and funds industries and life
policy administrators for whom these changes may have a material
The consultation closes on 3 October 2016 and draft legislation
is expected in advance of Finance Bill 2017.
Draft disguised remuneration legislation published for
HMRC has long since held the view that disguised remuneration
schemes - such as those employed in the long-running Rangers EBT
case - do not work and at Budget 2016 the government announced a further
package of changes to tackle the continued use of disguised
remuneration schemes which exploit perceived weaknesses in the
disguised remuneration legislation introduced by Finance Act
A technical consultation launched last week, alongside draft
legislation for inclusion in Finance Bill 2017, includes more
detail on the proposals which also include a retrospective tax
charge on loans that remain outstanding at 5 April 2019 where
the loan has not been taxed and no settlement has been agreed with
The schemes that are being targeted by the new measures
typically involve loan transfers, where employees become indebted
to a third party instead of their employer who made the loan.
The new rules put beyond any doubt that all such schemes, which
result in a loan or other debt being owed by an employee to the
third party, are within the scope of the disguised remuneration
legislation at Part 7A ITEPA 2003 whatever the intervening
This consultation - which will run from 10 August to 5 October
2016 - also includes details of proposals to tackle similar schemes
used by the self-employed, and proposals to restrict the tax relief
available to employers in connection with the use of these
Disguised remuneration was one of the first areas of tax
avoidance tackled by the then coalition government. These schemes
usually involve an individual's income being funnelled through a
third party, with the money often then being paid to the individual
as a 'loan' that is never repaid.
While the disguised remuneration legislation, introduced in
2011, was successful in stopping the promotion of schemes that
existed at that time, since then a number of new schemes have
evolved. Furthermore, the 2011 legislation did not have
retrospective effect - only loans made after 9 December 2010 were
in scope. The new measures make it clear that all arrangements
which result in the employee being indebted to the a party are
'treated in the same way as if the third party made the loan
directly' and provide that, as at 5 April 2019, any outstanding
loan or similar payment from an EBT will be treated as if it were a
taxable bonus subject to PAYE and NIC as at that date.
June IA statistics
(AF4, CF2, RO2, FA7)
The Investment Association (IA) has just published its monthly
statistics for June 2016, the month that
incorporated the EU referendum. They do not make pretty reading for
fund managers, as the £3.468bn net retail outflow in the month more
than wiped out the overall net inflow since last November. The IA
has now reported two successive quarters of net outflows, setting
up 2016 to be potentially the worst year for over a decade - even
2008 saw net inflows of close to £5bn.
This month's highlights - or is that lowlights? - include:
- Net retail redemptions for the month were £3.468bn, the third
month of net outflows in 2016 and by far the largest.Grossretail
sales were £2.8bn up on May's figure, at £15.985bn, but were
swamped by £19.453bn of redemptions. Net institutional sales were
also negative, but to the tune of only £9m.
- Total funds under management rose across the month of June to
£948bn, helped by the demise of sterling and the bounce in Footsie
stocks after the Brexit vote (also largely currency-induced).
- Equity funds saw a net outflow of £2.8bn. The only equity fund
sectors to see an inflow were Japanese Smaller Companies and US
Smaller Companies. Predictably the biggest outflow, at £581m, was
from UK All Companies.
- The net retail outflow from the property sector was £1.448bn,
5.7% of the sector's end May value. That underlines why the gates
were slammed shut. However, as is often the case with IA
statistics, by the time they are published, the world has moved on:
some funds are now reporting inflows because Armageddon has failed
- The most popular sector in terms of net retail sales was Global
Bonds followed by Targeted Absolute Return. Fixed income funds
filled three of the top five sectors for retail inflows.
Predictably, property was the least popular sector.
- The total value of tracker funds jumped by £14.448bn (13%),
meaning that they now account for 12.0% of the industry total - in
May the corresponding figure was 10.8%.
The IA put a brave face on the June retail outflow, noting that
it was only 0.37% of overall funds. Nevertheless, their own charts
(see Chart A) show that the 6 month moving average
of net retail sales has been on a near uninterrupted decline since
peaking last July and is now in negative territory.
The Bank Of England acts
(AF4, CF2, RO2, FA7)
On Wednesday 3 August, while the Bank of
England's Monetary Policy Committee (MPC) was meeting, two reports
were published which must have given the Committee food for
- The National Institute for Economic and Social Research issued
its August economic review which forecast:
- GDP would grow by 1.7% in 2016, slowing to just 1% in 2017. A
decline of 0.2% is likely in the third quarter of this year, with a
risk of a further deterioration. There is an "evens chance" of a
technical recession (two successive quarters of declining GDP) in
the next 18 months;
- Inflation is set to increase significantly, peaking at just
over 3% at the end of next year, although the MPC was expected to
'look through' this temporary rise; and
- Now that government announcements have effectively scrapped Mr
Osborne's zero deficit goal, borrowing is projected to increase by
an extra £47bn over the period 2016/17 to 2020/21.
- The IHS Markit/CIPS UK Services Purchasing Managers' Index recorded the fastest rate of fall
for both output and new business since the dark days of March 2009
(when base rate was cut to 0.5%). Expectations were the weakest
since February of that year. The Chief Economist at Markit said:
- At these levels, the PMI data are collectively suggesting a
0.4% quarterly rate of decline of GDP (double the NIESR
- It is too early to say if the PMI surveys will remain in such
weak territory in coming months. However, the unprecedented
month-on-month drop in the all-sector index has undoubtedly
increased the chances of the UK sliding into at least a mild
- Services providers are certainly bracing themselves for worse
to come, with a record drop in business confidence about the year
ahead leaving optimism at its lowest ebb since February 2009.
The Bank's own forecast, revealed in its August Inflation Report are:
- The UK "was likely to see little growth in GDP during the
second half of the year". Overall the calendar year 2016 GDP growth
estimate stays at 2% because the first two quarters were stronger
than the Bank expected in its last report.
- For 2017 growth is projected to be 0.8%, whereas the May
Inflation Report forecast (which did not consider Brexit) was 2.3%.
According to Reuters this is the biggest cut ever seen from one
Inflation Report to the next, even exceeding that of the financial
crisis. For 2018 growth is estimated to be 1.8%, still 0.5% below
the May projection.
- Inflation is expected to pick up because of the weakness of
sterling. For the final quarters of 2016, 2017 and 2018, the Bank's
CPI projections are 1.2%, 2.0% and 2.4%, increases of between 0.2%
Faced with such a change in outlook the Bank has announced four
main measures on 4 August:
- A 0.25% cut in Bank Rate to 0.25%. The majority of the MPC
expect to support a further cut during the course of the year to an
"effective lower bound… … close to, but a little above, zero";
- A new Term Funding Scheme (TFS) of up to £100bn to reinforce
the pass-through of the cut in Bank Rate to consumers and business.
This is designed to encourage banks and building societies to
expand lending by giving them "a cost effective source of funding"
(as little as 0.25%) in the form of central bank reserves;
- The purchase of up to £10bn of UK non-financial investment
grade corporate bonds from a pool the Bank reckons to be of about
£150bn (ie non-gilt quantitative easing); and
- An expansion of the asset purchase scheme for UK government
bonds (i.e. more 'normal' quantitative easing) of £60bn, taking the
total stock of these asset purchases up from £375bn to £435bn. More
QE had been widely expected.
The Bank's announcement has already forced gilt yields to new
lows, driven down sterling 1.5% against the dollar and pushed the
Footsie up 100 points. Whether still more monetary medicine will
work is not certain. Nor is it clear how monetary policy will ever
return to what was once thought of as normality.
(AF4, CF2, RO2, FA7)
The Bank of England has hit a problem as its starts the latest
round of quantitative easing (QE): not enough sellers.
Two weeks ago the Bank of England announced that it would increase quantitative
easing (QE) by £70bn - £60bn of gilt purchases and £10bn of
corporate bond buying. The Bank said in a Market Notice, issued on 4 August, that from 8
August until the end of October it initially intended to buy
£3.51bn of gilts each week, split equally between three different
maturity bands : 3-7 years (on Mondays), over 15 years (Tuesdays)
and 7-15 years (Wednesdays). The £3.51m a week figure was pitched
to take account of both the announced extra QE (to be spread over
six months) and the £12.1bn the Bank will be receiving on 7
September from the maturity of 4¼% Treasury 2016, bought under an
earlier round of QE.
On 9 August some problems emerged. The Bank
attempted to buy £1.17bn of conventional gilts with maturities
exceeding 15 years, as planned, but was only able to find sellers
of £1.12bn of stock, despite reportedly bidding above market price.
The holders of the long-dated stock - typically pension funds and
insurance companies - just did not want the problem of having cash
to reinvest when they already had an asset that matched their
It is worth putting the Bank's planned purchases
into context. The Bank sets itself a limit of holding no more than
70% of the 'free float' (ie total issue minus government holdings)
for any particular stock. According to the Bank, as at 27 July that
meant there was £221.7bn of 15+ years stock available to purchase.
For 3-7 years and 7-15 years the corresponding amounts were
£100.0bn and £68.6bn. The fact that the Bank was planning equal
amounts of purchases across all three maturities shows that it was
already aware that fishing in the biggest pool would not be
Another way of looking at the Bank's actions is
to consider that the Treasury's planned conventional gilt issuance
this year is £74.5bn (of which £27.3bn is long-dated). As the Bank
will also have to reinvest £11.16bn from the maturity of 1¾%
Treasury 2017 in January bought under QE, the planned new £60bn QE
purchase will see the Bank effectively mopping up nearly £9bn more
than all of 2016/17's conventional gilt issuance. Add to this the
fact that the Bank plans to buy about 7% of the investment grade
non-financial corporate bond market and it is little wonder the
institutions are reluctant sellers.
There were questions raised two weeks ago about the
effectiveness of further QE, but that was mainly about its ability
to stimulate the economy. The Bank's problem with gilt purchases is
a reminder that we are running out of monetary policy ammunition
and that the government needs to act on the fiscal front. There
nothing is due to happen until the Autumn Statement, probably at
least three months away…
July property valuations
(AF4, CF2, RO2, FA7)
A "technical failure" slightly delayed the publication on Friday
of IPD's monthly property index for July. The index had been widely
awaited as an indication of just how much of an effect surveyors
believed that the Brexit vote has had on commercial property
values. For June, the IPD index showed an overall return of +0.2%,
which was a combination of positive rental income and a small drop
in capital values (about 0.2%). Earlier last week CBRE, the
property consultants, issued their monthly index for July, showing an overall return for
the month of -2.9%, with average capital values dropping by
The IPD monthly figures cover 3,341 properties worth £47bn,
which MSCI IPD reckons represents 10.5% of the professionally
managed real estate investment universe. It is therefore a good
yardstick, although the less frequently issued IPD indices do have
According to IPD, the overall return for July was -2.4%, with
capital values dropping by 2.8%. The largest declines (4.1%) were
in Central London, a finding which echoes the CBRE data.
The IPD data emerged the day after Aviva said that the dealing freeze (sale and
purchase) applied to its Property Trust "is … likely to be in place
for a period of at least six to eight months from the date of
suspension." Trustnet shows that as at 30 June the Aviva fund was
94.1% invested in property, with a cash holding of 5.4% and the
balance in shares.
The IPD and CBRE figures both suggest that while property prices
did drop after the Brexit vote, there was no precipitous decline.
This raises interesting issues about the validity of the
post-Brexit prices quoted by some funds. As ever with property -
residential as well as commercial - the value is only known for
certain when a buyer signs on the dotted line. A point to remember
when looking at the indices is that they are based on valuers'
assessments and are no measure of market liquidity, which is the
driving factor for fund suspensions.
Fixed protection 2016 and individual protection 2016
(AF3, RO4, CF4, JO5, FA2, RO8)
HMRC has recently published Newsletter 80 which confirms that
protection applications can now be made.
The online service for lifetime allowance pension scheme members
to apply to protect their pension savings from the lifetime
allowance tax charge is now available.
The online service replaces the interim paper process for
applying for fixed protection 2016 (FP2016) and individual
protection 2016 (IP2016) and replaces the online form for applying
for individual protection 2014 (IP2014).
From now on, members who want to apply for lifetime allowance
protection will have to do so online.
Members who want to apply for protection can access the online
service through the Protect your lifetime allowance guide.
To apply members will need an HM Revenue and Customs (HMRC)
Online Services account. To create an account, or to login to an
existing one, they should go online to HMRC services.
As this is an online service, members will no longer receive
paper certificates with their lifetime allowance protection
details. Instead they will be able to view their protection details
online and they will be able to print their protection details as
Withdrawal of the interim application process
With the launch of the online service, applications for lifetime
allowance protection made using the interim process will not be
processed. Any applications made after the 31 July 2016 using the
interim paper process will be returned and the individual will be
directed to the online service to make their application.
Any interim applications that are in hand on 31 July 2016 (and
if the application is successful) those individuals will be issued
a permanent protection notification number. Members with permanent
protection notification numbers will not need to reapply online and
will be able to view details of their protection in their HMRC
Online Services account. To create an account, or to log in to an
existing one, they should go online to HMRC services.
Temporary reference numbers
If members have applied for IP2016 or FP2016 protection using
the interim application process but fail to follow this up with an
online application, providing these individuals have not lost their
protection, their pension savings will continue to be protected and
there will be no tax consequences.
However, from August 2016 onwards, only permanent reference
numbers will be recognised by HMRC. In addition, when the pension
scheme administrator look up service becomes available, it will
only validate permanent reference numbers.
When an individual applies for a permanent protection
notification number, details of their IP2016 or FP2016 (and any
previous lifetime allowance protections) will show in their
personal tax account. Going forward, the personal tax account will
be populated with more details for members to access at any time so
it will save time in the future if applications are made for
permanent protection notification number sooner rather than
Pension scheme administrator look up service
In Pension Schemes Newsletter 78, reference was made to the
lifetime allowance look up service for pension scheme
administrators to check the protection status of their members.
HMRC are continuing to develop this service and this will be
available later in the year for pension scheme administrators to
In the meantime scheme administrators should continue to check
the protection status of their members before making payments.
Members who protected their pension savings before the April 2016
reduction in lifetime allowance will have a paper certificate
confirming their protection status.
Most members applying for IP2014 will have received a paper
certificate, however please note that some members who have applied
more recently may have received a letter from HMRC instead
confirming their protection details. If this is the case, the
IP2014 protection details will be available to view online.
Members who applied for IP2016 or FP2016 using the interim
process will have received a letter from HMRC confirming their
From 28 July 2016 everyone applying for IP2016, FP2016 or IP2014
will do so online and if their application is successful, will
receive a permanent protection notification number and pension
scheme administrator reference number at the end of their online
application. Members will also be able to print details of their
HMRC attacking on in-specie contributions?
(AF3, RO4, CF4, JO5, FA2, RO8)
Over the last few weeks, there has been an on-going technical
conversation carried out by members of AMPS (the Association of
Member Directed Pension Schemes; the trade body for SIPP and SSAS
administrators) over in-specie contributions. There appears to be
growing evidence that HMRC is attacking SIPP/SSAS members over
in-specie contributions that have been made and withholding tax
relief-at-source claims by scheme administrators.
As you might expect this is starting to cause concern amongst
We now understand that Pinsent Masons is intending to host a
roundtable discussion to assess whether there is any appetite for a
coordinated response to the HMRC apparent change in how they are
willing to deal with in-specie contributions.
The topics that are to be covered are:
- The issues - contribution agreements, creating a debt, settling
- Possible arguments to persuade HMRC of a different stance.
Legislation, tax manual and other methods that the contribution
debt is created and settled.
- AMPS steps so far with HMRC. AMPS is being represented at this
- Gathering samples of contribution agreements. Which ones are
being challenged and which are not?
- Status of information notices. Ignore at your peril. How to
- Running a test case, including: merits of remedy either to Tax
Tribunal on availability of the relief or a Judicial review on the
decision to withhold relief; selection of test case; funding; and
management of HMRC including information flow.
- Appetite for an action group
In the case of SIPP or SSAS administrators, in the first
instance, it may be worth liaising with AMPS over this assuming
that you are members. If not, it may be worth your while
considering joining as they are a very useful forum and lobby
In the case of advisers, you may want to make contact with the
SIPP operators you use, before speaking to clients about the
possibility of making any in-specie contributions.