HMRC Tax Simplification – Part 4
You’ll be pleased to hear that the tax guys are still burning the midnight oil in their attempt to put out a definitive guide to all the A-Day tax changes on pensions. They’ve just published their fourth issue of the Pensions Tax Simplification Newsletter and I’ll be including a link to it in this BeeLine for you to get to if you want to read it.
A few weeks ago, when Her Majesty’s Revenue and Customs (HMRC) put out Newsletter number 3, they had written ten of the proposed fourteen chapters of the manual. This newsletter doesn’t add any new chapters, but it does clarify one or two glitches that crept into some of the earlier drafting as well as adding some practical stuff around the transition of Retirement Annuity Contracts as they change to being taxed under PAYE from April 2007.
Firstly, though, I suppose the whole question of the treatment of employers’ contributions is the big issue being dealt with here. When the last chapters were added to the manual a few weeks back, much was made of the fact that the chapter on pension contributions was missing the expected confirmation of the way employers’ contributions will work in the new regime. Many have taken the omission of this crucial part of the manual as evidence that the HMRC guys are about to surprise us with some kind of U-turn on the £215,000 maximum annual contribution employers will be able to make for an employee after A-Day.
Well, according to this newsletter, that doesn’t appear to be the case and we all seem to have got ourselves worried about nothing. They explain here that ten out of the fourteen chapters are now available on the internet and that the remaining four chapters will be available by early November. It appears that they were unable to publish the guidance on employer contributions at the same time as the guidance on employee contributions “due solely to a technical hitch”. The employer contribution guidance, they say, will now be published in November at the same time as the other missing bits of the manual, although it is possible that a pdf version may be made available to us all a little earlier than that.
You’ll remember from some of my earlier BeeLines on the subject that the tax guys have said they will be publishing a one-off version of the definitive set of tax rules as a downloadable pdf file so people can use it for training purposes etc. It won’t ever be updated in print-down form, future changes will only be made to the internet version, but it will at least for a while be something of a ‘pension bible’ for those of us caught up in this stuff. A word of warning, though; judging by the amount of paper it takes to print what’s been published so far it might be worth getting new paper and ink cartridge stocks in now if you’re going to have a go at printing the whole thing off in one go.
There’s also a bit of a change in this stuff from the HMRC people as far as the way that the taxation rules will apply when people use residential property held by a pension scheme for their own use. The following quote taken directly from the newsletter should cheer up any of you who were worried by what was said in the earlier erroneous draft:
“It has also been drawn to HMRC's attention that the example contained at RPSM 07102280 demonstrating the process to go through to arrive at the cost of a benefit where a member of a pension scheme is allowed to live in a property owned by the pension scheme is incorrect.
The example states that a charge will be due even if the member pays a commercial rent for use of the property. This is not how the legislation is intended to work. We are taking steps to remove the example from the manual and regret the inclusion of this error in the meanwhile.”
This current newsletter also includes something on Enhanced Protection and life assurance which, however many times I read it, still baffles me. I’ll be returning to this subject and the wider issue of life assurance after A-Day in a few days time when I’ve had the chance to do a bit more reading up on it. In the meantime, hang loose, and here’s a link to take you to the Pension Simplification Newsletter number 4:
5 October 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.