RPSM04302010 - Scheme Administrator Pages: Taxation: Appeal and claims rights and similar rights of the scheme administrator: Right to apply for a lifetime allowance charge to be discharged

Right to apply for a lifetime allowance charge to be discharged

[Section 267][The Registered Pension Schemes (Discharge of Liabilities under Sections 267 and 268 of the Finance Act 2004) Regulations 2005 - SI 2005/ 3452] 

One of the tax charges that a scheme administrator is liable for under Part 4 of Finance Act 2004 is the lifetime allowance charge. Usually, this liability is a joint and several liability with the scheme member.

However, where a scheme administrator of a registered pension scheme 

• is liable to the lifetime allowance charge in respect of a benefit crystallisation event (BCE), and
• the scheme administrator reasonably believed all or part of that liability was not actually due, and
• as a result, it would not be just and reasonable for all or part of that liability to be a liability of the scheme administrator

that scheme administrator may apply, in writing, to HMRC to have either all or part of the lifetime allowance liability discharged.

If the scheme administrator is liable to lifetime allowance charges in respect of more than one BCE then a separate application to be discharged must be made in respect of each BCE.

The application should normally be made by the person liable to the lifetime allowance charge but, exceptionally, the trustee, guardian or receiver may make an application in respect of an incapacitated person. For this purpose an incapacitated person is defined in section 118 of Taxes Management Act 1970.

Grounds for applying for a lifetime allowance charge discharge

Any application for all or part of a lifetime allowance charge to be discharged must set out the particulars of the ground relied on in that discharge application.

The only grounds on which HMRC will consider a discharge of a lifetime allowance liability in response to an application by the scheme administrator is that

• in the case of an application to be discharged from the full amount of the lifetime allowance charge, the scheme administrator reasonably believed that there was no liability to the lifetime allowance charge in respect of the BCE, or
• in the case of an application to be discharged from part of the lifetime allowance charge - the excess amount - that the scheme administrator reasonably believed that the amount of the lifetime allowance charge in respect of the BCE was less than the actual amount, and
• in all the circumstances of the case, it would not be just and reasonable for the scheme administrator to be liable in respect of the BCE to the lifetime allowance charge, or, in the event of an application for a partial discharge, the excess amount.

Time limit for making an application for a lifetime allowance charge discharge

The time limit for making an application for a discharge from all or part of a lifetime allowance charge on the scheme administrator is:

• where there has been an assessment made under section 36 Taxes Management Act 1970 (sometimes known as a 'discovery assessment'), within two years of the date on which the assessment was made.
• where there has been no discovery assessment and the scheme administrator is a company, no later than 6 years after the end of the accounting period to which the application relates
• where there has been no discovery assessment and the scheme administrator is not a company, no later than five years after 31st January next following the year of assessment to which the application relates

Errors and mistakes

If the applicant subsequently discovers that an application for a lifetime allowance charge discharge contains an error or a mistake then they may make a supplementary application in the same manner and within the same time limit as was allowed when they made the original application.

HMRC decisions on receiving an application for a lifetime allowance charge discharge

On receiving an application from the scheme administrator, HMRC must decide whether to discharge the scheme administrator's liability to the lifetime allowance charge, or to the excess amount in the case of an application for a partial discharge.

The scheme administrator's right to be notified about the HMRC decision is set out in RPSM04302050 and their rights of appeal and review are set out in RPSM04302060 and RPSM12102000 onwards.