HM Revenue and Customs has extended its deadlines for savers who want to use their pension scheme to settle tax charges from a previous year.
The tax authority announced yesterday (July 20) it was extending the reporting and payment deadlines for scheme pays arrangements.
Scheme pays allows savers to settle annual allowance tax charges through their pension scheme without needing to find cash upfront.
Under current rules, where an individual has an annual allowance charge, they must report it on their self-assessment return and tell the scheme by July 31 that they want to use scheme pays.
The scheme administrator must then report this charge to HMRC by the following February.
Under the new rules the scheme administrator must report and pay the annual allowance charge, so the deadline for paying the charge relates to when the scheme administrator is notified of the charge, rather than a fixed period after the end of the tax year.
The schemes will pay the charge if it arises because of a retrospective change of facts, the charge is £2,000 or more, or an individual asks the scheme to pay it within the new deadlines.
The changes will have effect from April 6, 2022 but will be retrospective to April 6, 2016, meaning they will cover all tax years since 2016/17.
HMRC confirmed it will apply to all individuals facing a retrospective annual allowance tax charge of £2,000 or more and will not be limited to those affected by the age discrimination found in the 2015 public service pension reforms, known as the McCloud case.
Graham Crossley, NHS pension specialist at Quilter, welcomed the changes saying it will be helpful for the likes of NHS doctors where there is a legacy of annual allowance issues.
Crossley said: “Following the recent McCloud remediation measures, there may be a number of cases where an individual’s pension growth will be higher retrospectively. [This] measure will allow mandatory scheme pays to be used to help individuals who have worked tirelessly on the frontline of the pandemic.
“The deadline has been extended to three months after notification or six years after the end of the tax year, so includes all tax years since 2016/17.”
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