Annual and lifetime allowance changes

In the Budget on 11 March, it was announced that from tax year 2020/21, the "adjusted income" figure above which the individual's annual allowance is subject to a tapering reduction is increased from £150,000 to £240,000.  The "threshold income" figure (below which no account is taken of the value of employer pension contributions when working out whether someone is subject to the taper) rises from £110,000 to £200,000.

Previously, a person subject to the maximum annual allowance taper would have an annual allowance of £10,000.  From tax year 2020/21, the annual allowance is reduced to £4000 for someone who is subject to the maximum taper.

The lifetime allowance was increased in line with CPI for tax year 2020/21, giving a lifetime allowance of £1,073,100.

Technical consultation: Fifth Money Laundering Directive and Trust Registration Service

The Government has consulted on extending the Trust Registration Service as part of its implementation of the EU's Fifth Money Laundering Directive (MLD 5) into national law.

The Fourth Money Laundering Directive (MLD 4) was transposed into UK law in June 2017.  Although MLD 4 was not specifically targeted at pension schemes, it did bring in new requirements on trusts, thus imposing additional compliance requirements on many pension schemes.  These initially comprised record-keeping requirements and, depending on what taxes the pension scheme had been liable for, potentially an obligation to register with the new Trust Registration Service (TRS).  However, in a last minute U-turn, HMRC announced that registered pension schemes would not be required to register on TRS.

There had been concerns that the regulations implementing MLD 5 might require pension schemes to register with the TRS.  It appears to be the intention of the draft regulations (published with the consultation) is to exclude registered pension schemes and trusts of life insurance policies from the obligation to register, though the wording is not as clear as it could be in relation to pension schemes which have paid certain types of tax and might therefore fall within the definition of a "taxable relevant trust".

Pension schemes newsletters 118, 119 and 120: changes to pension processes as a result of Covid-19

HMRC's Pension schemes newsletters 118, 119 and 120 announced temporary changes to pensions processes as a result of Covid-19.  These are:

• payment holidays on loans due from connected parties and rents due on commercial properties agreed on an arm's length basis do not require an independent valuation;
• a relaxation of the requirement for wet ink signatures on relief at source repayment claims, R63N income tax repayment forms and APSS107 annual statistical returns;
• relaxation of the requirement to submit relief at source excess relief schedules;
• the ability to apply for cancellation of penalties and interest on late Accounting for Tax returns/tax charge payments/ reports of transfers to QROPS where the delay is the result of resourcing issues caused by Covid-19;
• relaxation of protected pension age requirements (until 1 November 2020) where public sector workers return to work to support the response to Covid-19;
• HMRC will not issue notices to file pension schemes returns for 2019 to 2020;
• accepting that "special circumstances" apply for the purposes of valuing shares and securities in accordance with the Capital Gains Manual if trading has been suspended as a result of Covid-19 or if the closing prices are not a proper measure of market value of the shares or securities as a result of Covid-19;
• flexibility on valuation methods used to arrive at a fair and reasonable value of pension scheme assets;
• a request to e-mail HMRC at reliefatsource.administration@hmrc.gov.uk if a scheme administrator has submitted or needs to submit a relief at source repayment claim in respect of tax relief given in respect of a member who is unable to get a National Insurance number  due to HMRC suspending the process of applying for a National Insurance number;

Pension schemes newsletter 117: member residency for relief at source 2020 to 2021

Pension schemes newsletter 117 (published at the end of February) advised administrators that they should have received their annual notification of residency status report.  It advised that administrators should use the online service for looking up residency status for relief at source if the member does not appear on the notification of residency status report or is unmatched.  The "rest of UK" residency status should be used if a member's status cannot be checked before applying relief at source for the member, or if a member does not appear on either the annual report or the look up service.  The newsletter says that the same tax rate must be applied for a member for the whole of the tax year even if the member's residency status changes.