Use of substitute P60 for information on the Lifetime Allowance


HMRC clarifies how information should be presented

A pension scheme administrator must provide a statement, at least once each year, to each scheme member who is entitled to be paid a pension. The statement must tell the member the percentage of the lifetime allowance that has been expended so far as a result of benefit crystallisation events. The same requirement is imposed on insurance companies that are paying annuities to scheme members.

HMRC's Registered Pension Schemes Manual suggests that this obligation may be met by including the information on a P60 that is issued to pension scheme members. As there is no statutory requirement for pension information to be included on a P60, the scheme administrator must apply to HMRC's Non-Standard Forms Examiner for approval to use a substitute P60 that includes the extra information.

In the latest Pensions Tax Simplification Newsletter, HMRC has provided guidance on the format in which the information should be provided. The percentage of the lifetime allowance used to date should be shown to two decimal places. The form should simply state "Standard lifetime allowance used = xx.xx%" (or x.xx% or xxx.xx%), or similar wording. There is no need to show the value of the standard lifetime allowance relevant to the tax year being reported as the percentage used normally remains fixed, whatever the change to the standard lifetime allowance each year.

Where the amount shown includes the amount used-up by a pension commencement lump sum as well as a pension, any impression that the amount relates to the pension only should be avoided.

As there is no requirement for a statement to be issued in respect of a pension that was already in payment on 6 April 2006, even though the pension uses up some of the lifetime allowance if a benefit crystallisation event occurs subsequently, HMRC recommends that a P60 should not show a nil percentage as that would be misleading. It suggests that the P60 should state that lifetime allowance information is not shown because the pension started in payment before 6 April 2006.

Submissions made to the Substitute Forms Examiner for approval of substitute P60s should take these points into account.

...UK Payroll News - Latest


Source:
Crystallised benefits and benefit crystallisation events - statement to member
Information provided by the insurance company to the pensioner or annuitant
Use of P60 (Substitute) for information on Lifetime Allowance

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