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In response to representations received, HMRC have published a statement regarding the reattribution of inherited estates and payments to pension policyholders. Under the simplified pensions tax regime, which came into force from 6 April 2006, tax relieved funds held in a pension scheme should be used to provide for an income in retirement. This means that certain payments made out of tax subsidised pension savings, which inappropriately reduce the amount of savings available to provide a pension in retirement, are subject to tax charges designed to re-coup the tax reliefs related to them – these are commonly referred to as ‘unauthorised payments’ charges. In addition, under the new regime specified types of payment are excluded from being subject to the unauthorised payments tax charge, which may, for example, be used where the specific type of payment does not actually result in any diminution in value of the fund available to provide for a pension in retirement. HMRC have received representations on the tax treatment of certain payments made to those holding with-profits policies to facilitate the reattribution of ‘inherited estates’ – which is defined in the Conduct of Business sourcebook issued by the Financial Services Authority, as an amount representing the fair market value of the with-profits assets, less the realistic value of liabilities of a with-profits fund. Where such payments are made to those holding with-profits policies as part of a pension arrangement, an unauthorised payments charge may arise. Where, however, such a payment does not diminish the value of the funds held within a pension scheme, and is made to protect policyholders’ interests, the Government does not believe that the payment should be subject to an unauthorised payments tax charge. Proposals are now being put forward to amend the pensions tax legislation to relieve payments made in conjunction with a reattribution mechanism which involves the application of Part 7 of the Financial Services and Markets Act 2000 (transfers of insurance business) from the unauthorised payments tax charge. Link HMRC: Reattribution of inherited estates & payments to pension policyholders |
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About The Author  Sarah Laing Sarah is a Chartered Tax Adviser. She has been writing professionally since joining CCH Editions in 1998 as a Senior Technical Editor, contributing to a range of highly regarded publications including the British Tax Reporter, Taxes - The Weekly Tax News, the Red & Green legislation volumes, Hardman's, International Tax Agreements and many others. She became Publishing Manager for the tax and accounting portfolio in 2001 and later went on to help run CCH Seminars (including ABG Courses and Conferences). Sarah originally worked for the Inland Revenue in Newbury and Swindon Tax Offices, before moving out into practice in 1991. She has worked for both small and Big 5 firms. She now works as a freelance author providing technical writing services for the tax and accountancy profession. |
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Article Added Monday, 16 July 2007 | 1100 Hits |
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