Pensions Tax Simplification
Newsletter No 3 August 2005
- Changes to Application process
- Simplification and International issues
- Latest news
a) Registered Pensions Schemes Manual
b) Online Services
- Contact us
This is the third edition of the Pensions Tax Simplification Newsletter.
The Newsletter keeps pension providers, employers and savers informed of
new developments before A-Day. If you are a pension provider or an employer,
please make sure that the appropriate people in your organisation read it.
2. Changes to Application process
To make the transition from the current approval process to the new registration
process as easy as possible for our customers, we have made some changes.
These will only apply to pension schemes applying for tax approval on or
after 1 September 2005, but which are established on or before 5 April 2006
The tax approval process will remain the same for schemes set up on or
before 5 April 2006 apart from in the following three areas.
- We are asking that the details of the Scheme Administrator(s) as defined
in Section 270 and Schedule 36 Finance Act 2004 are submitted with the
current application form on a supplementary page . This is on a voluntary
basis. If you choose not to submit the supplementary page when the new
online Pension Schemes Service goes live on 6 April 2006 it will not
be possible for either the Scheme Administrator or any Practitioner
to be able to access the pension scheme record online without first
taking additional actions.
- Occupational and ex-gratia pension schemes applying for tax approval
on or after 6 December 2005 and established on or before 5 April 2006,
will need to submit their application for approval to HMRC: Audit &
Pension Schemes Service, Yorke House, Castle Meadow Road Nottingham NG2
1BG by 30 June 2006.
- Applications for tax approval of a Personal Pension Scheme received
by 28 February 2006 meeting the conditions to be approved will be guaranteed
to receive approval before 5 April 2006 to allow contributions to be made
in the current tax year. Whilst we will do everything possible to approve
as quickly as possible those that meet the conditions for approval received
after 28 February 2006 it will not be possible to guarantee it before
5 April 2006 to allow contributions to be made in the current tax year.
Reasons for requesting details of the Scheme Administrator
As you will be aware the role of Scheme Administrator will be the most
important role for tax purposes from 6 April 2006 onwards. HMRC would therefore
- Try and ensure we have the correct information going forward and to
avoid the need for schemes to have to amend it again after 5 April 2006.
- pre-register Scheme Administrators for the new online Pension Schemes
Service which means they will be able to complete registration for the
service on 6 April 2006 when it goes live and immediately view the pension
scheme record and carry out transactions online.
- offer the Scheme Administrator the opportunity to authorise HMRC to
deal with a Practitioner on their behalf rather than having to do it as
a separate process on or after 6 April 2006. This will mean that from
6 April 2006:
- The authorised Practitioner will be able to view information relating
to the pension scheme on the online Pension Schemes Service and amend
it on the Scheme Administrator's behalf.
- HMRC will be able to communicate with the Practitioner acting on
behalf of the Scheme Administrator.
The Scheme Administrator can of course still provide authority on or after
6 April 2006.
Why have we changed the deadline for submission of applications for tax
approval by occupational and ex-gratia pension schemes?
In changing the deadline we have considered a number of factors set out
below and have consulted with the Pensions Industry Working Group. We believe
that for the vast majority of pension schemes' applying for approval
the new deadline is reasonable. This is based on:
We recognise that for a small percentage of pension schemes (those that
are self-administered and where details of retained benefits have to be
obtained from third parties) this deadline might be difficult to meet. In
addition there is a view that there might be a large increase in the number
of self-administered pension schemes setting up in March 2006.
We will therefore accept applications for tax approval received after 30
June 2006 from self-administered pension schemes where it has not been possible
to obtain details of retained benefits from third parties in time to meet
the 30 June 2006 deadline. We will expect the application to be made as
soon as possible after receiving the details from the third party. There
should also be a covering note to explain this is the reason the application
is after 30 June 2006.
Other cases (which we expect to be small in number) where the application
for tax approval was not received by 30 June 2006 will be considered on
a case by case basis. The types of circumstances where we consider it might
be appropriate to extend the deadline are:
- The pension scheme is set up as a result of a merger/take-over close
to 5 April 2006.
- The pension scheme is set up close to 5 April 2006 to accept a large
- The exceptional cases where a full AVR is to be produced.
We appreciate there may be other equally compelling reasons not listed
here and we will of course consider these as well.
If there appears to be insufficient reason to accept a late application
then we will advise the pension scheme. The Scheme Administrator will still
be able to apply for the pension scheme to be registered by completing the
online registration process.
3.Simplification and International Issues
Simplification has an impact on people who come to work in the UK or those
who go to work abroad as well as those who may be transferring pension benefits
into or out of the UK. Here are the main points and a more detailed information
sheet will be available in the next Newsletter.
Pensions Tax Simplification may be important if you come from overseas
to work in the UK;
If you are a member of a non-UK pension scheme, Migrant Member Relief (MMR)
will enable you, when you come to work in the UK, to claim UK tax relief
on the contributions that you make whilst resident here. You will get the
same reliefs as if you were contributing to a UK registered pension scheme.
Employers can also get UK tax relief on their contributions to the overseas
scheme. MMR replaces "Corresponding Relief" and has fewer restrictions.
Transferring your pension to/from the UK;
- There are no HMRC restrictions on transferring into UK-registered pension
schemes from pension schemes abroad. If your transfer is from a recognised
overseas pension scheme, and you think you may be at risk of contributing
more than the Lifetime Allowance (LTA), you may wish to consider claiming
an enhanced LTA by registering with HMRC. Guidance to claiming will be
published on the HMRC website and you can claim using the 'Enhanced
Lifetime Allowance (International)' form that can be submitted either
online or on paper. Forms completed online can be viewed and amended.
Once a claim is accepted, HMRC will issue a certificate which will state
the enhanced lifetime factor and the date from which it is valid.
- Transfers out of UK registered pension schemes to pension schemes abroad
will be authorised payments as long as the overseas scheme is a "qualifying
recognised overseas pension scheme” (QROPS). You will not have to
emigrate to do this. On transfer, there will be a test against the lifetime
allowance and any of your funds in excess of the LTA will be subject to
a tax charge of 25%.
There are also consequences for members of UK pension schemes moving abroad;
- There are no residence restrictions on members of UK registered pension
- If you have already left the UK, but your UK pension comes into payment
on or after 6 April 2006 it will be subject to the lifetime allowance.
As above, you may be eligible for protection of pre A-day rights by registering
with HMRC by 5 April 2009.
- Certain types of payment made out of overseas schemes containing funds
which have benefited from UK tax reliefs may be liable to UK tax charges
such as the annual allowance, lifetime allowance and unauthorised payment
4. Latest news
a) Registered Pension Scheme Manual
Two new chapters of the manual
have now been published, Pension Age and Registration and the Glossary
has been updated. In September, chapters on, Benefits, the Annual Allowance,
Transfers, Investments, Contributions and the Lifetime Allowance will be
b) Online Services
on this was published on 5 August.
On the 8th August we published details of:
- Further draft regulations and orders;
- A note of additional regulations and orders needed to give full effect
to the new regime;
- The consultation on lump sums from money purchase arrangements and
the intention to introduce legislation in Finance Bill 2006;
- A draft of the proposed legislation in Finance Bill 2006 for unsecured
Pensions Tax Simplification
5. Contact us
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