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HMRC Newsletter Number 5
It’s all go again at the moment on the pension front. Her Majesty’s Revenue & Customs (HMRC to you) have just published their fifth newsletter on the ins and outs of the new post A-Day tax regime. When I saw that I rushed off to their website hoping to find the missing four chapters of their Registered Pension Schemes Manual (our new pension Bible), but unfortunately they’re not there yet.
What was there was a note to say that the draft forms printed in April have finally been made available. This refers to all the new forms pension schemes will need including the all-important forms people will need to complete to apply for Primary and/or Enhanced Protection, so I thought you’d be pretty interested to know they’re now around at last. You can get to them by following this next link.
Pension Schemes: Tax Simplification - Draft Forms
Also in the Newsletter there’s a Technical Point clarifying the way that tax relief will work for employer’s contributions where accounting periods commence before A-Day and end after A-Day. As an example they cite an accounting period commencing on 1st July 2005 that will end on 30th June 2006. For the purposes of tax relief for employers’ contributions this will be within the new rules.
The announcement of this in the last Newsletter in September was apparently mis-reported in the press as meaning that the annual allowance will apply to contributions made before A-Day. This Newsletter puts things straight by saying:
“The article in our September Newsletter dealt with tax relief for employer contributions only, and not with the annual allowance.
The annual allowance provisions in sections 227-238 Finance Act 2004 have no effect before 6 April 2006. The first “pension input period” begins on the first date after 5 April 2006 when a contribution is made in respect of the individual (or, for defined benefits or cash balance arrangements, the first date after 5 April 2006 when rights accrue to the individual). So a contribution made before 6 April 2006 cannot count towards an individual’s annual allowance or be subject to an annual allowance charge.
The different treatment for the annual allowance and employer contribution relief occurs because the annual allowance is an entirely new concept that does not exist before 6 April 2006, whilst relief for employers’ contributions does exist before that date. So for an employer contribution we need to establish whether it falls within the old/pre A Day rules or the new/post A Day rules. This issue is determined by rules in ICTA 1988 with the effect that the new rules apply to all employer contributions paid in accounting periods ending on or after 6 April 2006.”
I find it a little difficult to see how the press guys could’ve misunderstood that, but there you are…
Those of you who want to follow up on the chapter and verse of all that can do so by following the link below.
Pensions Tax Simplification Newsletter No 5 - October 2005
While I’m on the subject of not understanding things can I thank all of you who wrote in last week to point out that my pathetic attempt at having a stab at what PDF stands for was well off the mark with ‘Print Down File’. I stand corrected and (given the number of e-mails I read from so many of you on the subject) will never forget that it actually stands for ‘Portable Document Format’.
That’s it for this BeeLine except to say that our new ‘e-mail to a friend’ facility is now up and running on the BeeHive (it’s in the bits on the left) so you can now send any interesting stuff from the BeeLines on to other people (they don’t necessarily have to be friends as such) any time you want. I mean, how modern’s that?
1 November 2005
This document is based on Scottish Life's current understanding of the Finance Act 2004. This may be affected by future changes in legislation and the individual circumstances of the investor. Independent advice must be sought regarding the effect on a specific individual or scheme.
Any research and analysis included has been provided by us for our own purposes and the results of it are being made available only incidentally.
