Welcome to the eighteenth edition of the Newsletter. As usual, this contains a mixture of articles of a technical and operational nature, along with some useful reminders to help you if you need to contact HMRC.
In particular we are pleased to announce that we have now updated the Registered Pension Schemes Manual which will provide answers to most questions around the new tax rules. For those instances where it doesn’t, we are introducing a new e-mail help facility.
Please pass this Newsletter on to anyone else in your organisation who you think may find it useful.
We have been asked for clarification on the scenario where unvested pension funds are transferred from provider A under scheme A to provider B under scheme B, with the intention of going into unsecured pension under scheme B, and a lump sum is paid to the member under scheme A by provider A prior to the transfer.
If the funds in scheme A with provider A are not already in an unsecured pension fund prior to the transfer to Scheme B, then any lump sum paid under scheme A by provider A would not be a pension commencement lump sum because the condition in paragraph 1 of Schedule 29 of Finance Act 2004 (that the member becomes entitled to it in connection with the member becoming entitled to a relevant pension) would not be satisfied. The lump sum paid would therefore be an unauthorised payment.
A pension commencement lump sum can only be paid where a member is becoming entitled to a “relevant pension” under the scheme. A relevant pension includes income withdrawal, a lifetime annuity or a scheme pension. See RPSM09104130.
If the member is not entitled to take income withdrawal from the unsecured pension fund under the scheme, then funds have not been made available for the payment of a relevant pension under that scheme and so any lump sum paid will not be a pension commencement lump sum, it will be an unauthorised payment.
The taxable property provisions for investment regulated pension schemes introduced with effect from A Day by Finance Act 2006 include an exception from the residential property rules on taxable property for “a hall of residence for students”. We have received some requests to clarify what this expression means and feel it would be useful to publish our views more widely.
A “hall of residence” does not need to be owned by the educational establishment whose students are the sole occupants. But in order to be a “hall of residence” it does need to be connected to a particular educational establishment and provide accommodation on a communal basis for students of that establishment only. There are a number of characteristics which assist to indicate in any case whether or not the property in question is a “hall of residence”;
Consideration of these factors should enable a conclusion to be reached whether looking at all this objectively a property is a block of flats or “a hall of residence” for students.
It is clear from the characteristics described above that to be a hall of residence it is not sufficient that the accommodation is or may only be let to students. Self-contained apartments within a larger building will be residential property in their own right, not one or more halls of residence.
The accommodation for children in a boarding school will not generally be a hall of residence but will instead fall within the definition of a “home or other institution providing residential accommodation for children” and therefore not residential property for the purposes of the taxable property provisions.
The payer of a trivial commutation lump sum payment must account for tax in respect of the payment under the PAYE procedures set out in booklet CWG2(2006) (Employer’s Further Guide to PAYE and NIC) paragraph 23*. This says that where the lump sum payment is in respect of benefits that have not come into payment, then (unless the payer has been handed form P45 parts 2 & 3 from the former employment) the payer must use the emergency code, on a week 1 or month 1 basis, to deduct tax from the lump sum.
If however, the payer or recipient think that the recipient's tax code from the previous employment or another code may be more appropriate, they can approach HMRC before the payment is made and ask HMRC to issue such a code. If you have any questions relating to PAYE, these should be directed to the HMRC office that deals with your scheme or employer’s PAYE rather than APSS.
* The paper and CD-Rom versions of booklet CWG2(2006) omit 'month1' basis but the version on the HMRC website has been updated to include 'month 1'.
Changes introduced in Finance Act 2006 and The Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2006 SI1961 have resulted in amendments to the Event Report and both the paper and online form to register a new scheme for tax relief. The new forms will come into use in April 2007.
In order to ensure that users of these forms have as much notice as possible, we are publishing final drafts of these amended forms now. These are drafts and cannot be used to return or report information to HMRC. New downloadable PDF forms and online forms will be available in April 2007.
The changes to the registration form are as follows;
The revised draft Event Report incorporates questions about changes to the scheme information provided under bullets 2 to 5 immediately above, which occur subsequent to registration, as well as information about income and deemed income from investment-regulated pension schemes.
These revised forms cannot be used before April 07.
The deadline for submitting the Accounting for Tax (AFT) return for the quarter to 30th June 2006 along with any tax due to HMRC was 14th August 2006.
If you had tax to return for the first quarter and have not yet submitted an AFT you should still do so along with any tax due as soon as possible. Likewise, if you have paid the tax due but not yet submitted an AFT for this period you should still do so.
Where an AFT is submitted late, penalties which are set out in S260 FA04 will apply. Further information on these can be found in RPSM12100020.
In relation to the tax due, we understand that some systems automatically generate payments to include pence whereas the amount you are required to return on the AFT is rounded down to whole pounds. Ideally, your payment should exactly match the amount returned. If, however, your payment includes pence or does not match the amount on the AFT it is particularly important that you quote the correct charge reference with the payment. Otherwise it may lead to delays in matching the payment with the correct AFT.
If you have any questions about a payment that you have made you should contact the HMRC Accounts Office, Shipley on 01274 539328.
If you become aware of an error in an AFT you should make an amended AFT to APSS for the quarter concerned. Do not try to correct a submitted AFT by way of an adjustment in a return for a later quarter.
Further information on the AFT return and making amendments can be found in Newsletter No 15.
The continuous service procedure in Pensions Update Number 143 does not apply after 5 April 2006. In the post A Day regime benefits are no longer required to be based on service with a particular employer, and so continuous service treatment is generally no longer an issue to be considered.
APSS will therefore not be making any checks on forms PS155 where one of the following occurs after A Day;
We will check, if requested, forms submitted for a change of principal employer occurring before A Day where the member's fund at 5 April 2006 needs to be calculated for the purposes of notifying primary or enhanced protection.
We have published on 30th August an updated version of the Registered Pension Schemes Manual. The revised HTML version of the manual, includes updated pages for the Technical chapters as well as the member, Scheme Administrator and employer pages.
This version includes the amendments required as a result of Finance Act 06 and the regulations that were laid in July, (see Newsletter No 17), along with a number of improvements to the original pages based on suggestions and comments we have received. We have also taken the opportunity to finalise all the pages that were previously “under development”.
Technicians, scheme members, employers and Scheme Administrators all have different needs and requirements from registered pension schemes guidance, and the manual has been designed and written with this in mind. It contains four separate strands of guidance, each presented from a different viewpoint. The reader should select the type of guidance most suitable for their needs from the main menu and navigate to the particular area that they are looking for guidance on. Any reader can access any part of the manual should they feel the need to do so. The heading on each page says clearly who it is aimed at.
The RPSM will be kept under review and periodic updates will be made where changes are required. The published list of updates to the manual details the various changes made to RPSM and when they were made.
With the publication of this version of the RPSM, the vast majority of queries in relation to the new pension’s tax rules and the operation of registered pension schemes can now be answered on a ‘self-serve’ basis using the information available on the Internet.
Where there are new circumstances not catered for by the guidance, APSS will be adopting the same process as other parts of the Department using the Code of Practice (COP) 10 procedure. Customers will be asked to set out all the facts in order to gain a ruling on a particular transaction or circumstance.
As part of our ongoing drive to improve the service we offer customers, we are very pleased to announce a new e-mail facility. This is in addition to the APSS Helpline and Online Services Helpdesk.
If having consulted RPSM, further assistance is required, you can now contact us by sending an e-mail detailing your query. The e-mail template can be accessed from ‘Contact Us’ on the home pensions WebPage. When sending an e-mail to APSS, it will help us to deal with it quicker if in the subject line, you give the specific subject matter for the question. Please note however that this Internet e-mail is not a secure channel and therefore not suitable for enquiries that contain confidential information.
There is a work management functionality attached to this facility which will enable us to monitor e-mail traffic to ensure consistency of customer service across the office and communication channels and to improve the overall service we give. This route should in future be used in place of existing e-mail addresses for individuals in APSS for enquiries on the Pension Schemes tax rules.
We have also merged our separate helpline for contracted out enquiries with our APSS general enquiries helpline. If you have any questions relating to electing to contract-out of SERPS, you can either send an e-mail to the above address or phone the APSS Helpline on 0115 974 1600.
Sending or receiving information online is a convenient and quick way to do business with us. It is more reliable and efficient than using paper, and can cut down on storage space, post and administration. And because information mostly passes between computers without manual intervention, there is less chance of it being misinterpreted, or of mistakes being made.
However there will be occasions when HMRC needs to take offline Pension Schemes Online for maintenance, upgrades, etc. HMRC publishes on its website details of service availability for all online services.
If during a period when the service or part of the service is unavailable or you can’t access a required function and you urgently need to submit a form or return to HMRC, please remember there are downloadable forms available for all online processes that can be submitted to APSS Nottingham.
If you have any problems with Pension Schemes Online or access to the online service, you should contact the HMRC Online Service Helpdesk on 0845 6055 999, rather than APSS.
If you have any questions about anything to do with tax rules for pensions and you cannot find the answer in the Registered Pension Schemes Manual, you can contact us by email, phone or write to us using the details found on our contact page.