RPSM11103130 - Technical Pages: Lifetime allowance: The process for testing: In member's lifetime: At or before BCE: Establishing if there is a chargeable amount

The scheme administrator must establish whether or not there is a chargeable amount at a BCE

The scheme administrator is jointly liable for any lifetime allowance charge arising in the member’s lifetime, and is expected to account for any charge due direct with HMRC. So the scheme administrator is expected to take steps before a BCE occurs under their scheme (and, usually, before benefits are paid out) to establish whether or not such a charge will arise.

To do this an administrator will need to liaise with the member concerned, asking for sufficient information so that they can establish if a chargeable amount arises at the BCE.

The legislation does not prescribe how a scheme administrator does this. Schemes will need to establish the best way for them to do this, based on their own particular circumstances and administrative systems. The level of advance planning needed before a BCE, and the amount of time given to members to respond to any requests for information are also something for schemes to decide. It may be that a scheme administrator is content in certain circumstances to rely on simple member declaration. In other circumstances the scheme administrator may feel a more detailed questionnaire is necessary, with evidence requested.

RPSM11103140 outlines the issues a scheme administrator will need to consider, and the information the individual will possess which they can ask for in order to establish whether or not there is a liability.

The scheme administrator is reliant on the information or declaration the member provides to them. As such, the legislation provides for their discharge from liability to any lifetime allowance charge due where they can show they have acted in ‘good faith’, based on information or statements provided by the member. If the scheme administrator does not take reasonable steps to ascertain if there is a liability to a lifetime allowance charge HMRC are unlikely to accept that they should be discharged from any liability that in fact arose at a BCE through the ‘good faith’ provisions (see RPSM11105330).

Schemes are expected to retain documentary evidence of any member statement or information they have relied on so that they can show that they have reasonable grounds for believing that a chargeable amount did not arise at a BCE.