In April 2006 the Government introduced major changes to pensions legislation. For most taxpayers the reforms were positive increasing the amounts that can be saved within pension schemes with generous tax relief. Currently pension funds of up to £1.65 million and pensions per annum of £60,000 to 80,000 per annum can be paid without the new 55% tax known as the recovery charge applying to them.
For those who had already accumulated signifi cant amounts of pension at April 2006, care needs to be taken to avoid paying this tax on benefits in excess of these levels.
In certain circumstances, exemption from this tax charge will be granted by HMRC but only if it is applied for before 5th April 2009.
WHO needs to apply for this exemption?
Anyone who has significant pension benefits which had not all started to come into payment by 5th April 2006. In broad terms this equates to entitlement to occupational pensions of £80,000 per annum or more. If part of the pension was already being paid by 5th April 2006 then pensions of £60,000 per annum or more could be caught if additional pensions are yet to start.
WHEN does exemption need to be applied for?
As soon as possible. Although the deadline is 5th April 2009, gathering the necessary information from pension providers and getting HMRC to produce certifi cates of exemption can take two months or more. There will be no extension to this deadline as tax-payers have been given 3 years in total to complete this process.
HOW can the exemption be claimed?
HMRC produces forms and guidance notes but these refer to technical terms which only a specialist pensions practitioner is likely to understand. As the legislation governing this spans three Finance Acts and has been clarifi ed and amended many times, it is advisable to seek professional help in applying. HMRC is unlikely to be willing to amend the exemption if it proves not to be correct, unless they have made an error. LEBC Group has this expertise and can guide you on what forms of exemption to apply for, help you gather the information and complete the forms. We can also guide you on what steps you need to take in the future to retain the exemptions.
Andy Stowers, LEBD Group Ltd
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