The Finance Bill was introduced on 29 March and its Second Reading takes place on 26 April. As well as reflecting measures referred to in the Budget (see Pensions Update, March 2011), it includes a change to the rules on pension input periods. The PIP end date (for the future but not for the past) will now be either a nominated date or, if a scheme has made no nomination, 5 April, i.e. aligned to the tax year.
Further changes announced for inclusion in the next version of the Bill include closure of an unintended loophole which would otherwise have arisen on 6 April 2011, to prevent UK residents transferring pension savings overseas in order to avoid UK tax by exploiting the relevant double taxation treaty.
HMRC’s Pension Schemes Newsletter 46 includes useful clarification of certain issues relating to the Finance Bill, including:
- PIPs: if a member has nominated his own PIP end date, HMRC “would expect the scheme to have retained whatever communication the member sent them by way of nomination. If the scheme does not have any, the scheme can assume the scheme PIP applies” (open to abuse?).
- “Scheme pays”: members who retire on or after 6 April 2011 but before Royal Assent of the Finance Bill (likely to be in July) will not be able to opt for the scheme to pay their annual allowance charge because the relevant regulations cannot be laid before then; but other aspects of the new AA rules will apply to these retirements from Royal Assent backdated to 6 April.
- A summary of the Budget announcement on limiting the amount of tax relief available to employers when they make asset-backed contributions to their DB schemes and confirmation that a consultation will be issued “in Spring 2011”; subject to its outcome, the legislation will be included in the Finance Bill 2012.
The newsletter also announces a slight adjustment to the scheme sanction charge process: an assessment will no longer be issued within 30 days of receipt of the Event Report because if the report is submitted well before 31 January the tax is not yet properly due. Schemes which are winding up or wish to pay the tax earlier should contact HMRC.