Individuals have up to 5 April 2009 to notify HMRC of their right to primary protection. It may well be that an individual is due to crystallise benefits before they have received their certificate from HMRC. In these circumstances scheme administrators have two choices
Scheme administrators have until 45 days after the quarter in
which the lifetime allowance charge arises to pay the tax to HMRC
(see
RPSM12301300). Before the tax is due
to be paid to HMRC the individual may receive their certificate and
so be able to provide the administrator with the relevant details.
If a scheme administrator deducts the lifetime allowance
charge and it is later found not to be due the overpaid tax can be
reclaimed from HMRC. The scheme administrator must reclaim any
overpaid tax. They can then use the repaid tax to pay extra
benefits to the member. This can include an extra
pension commencement lump sum - as long as it is
paid within twelve months of the scheme administrator receiving the
refund of overpaid lifetime allowance charge from HMRC. If the
individual has passed their 75th birthday the pension commencement
lump sum can still be paid within this twelve month window.
If the scheme administrator chooses not to deduct any
lifetime allowance charge on benefits crystallising over the
standard lifetime allowance and lifetime allowance charge is later
found to be due the scheme administrator is still jointly and
severally liable to the tax. The tax liability would have arisen in
the quarter in which the benefits crystallise. Administrators
taking this course of action do so in the knowledge that there is a
risk that tax is due and consequently they may be liable to tax,
interest and penalties . HMRC is unlikely to accept that liability
to any tax, interest and penalties should be discharged through the
‘good faith’ provisions.
| Glossary ( RPSM20000000) |
