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Matthew Hutton MA, CTA (fellow), AIIT, TEP, presenter of Monthly Tax Review (MTR), reports on an important forthcoming deadline for pension purposes.

Context: the election deadline – 5 April 2009

The deadline for pension schemes to apply for enhanced and/or primary protection is rapidly approaching.  For those with large pension schemes, this is an invaluable area of planning which could save significant tax recovery should their funds be above the lifetime allowance of that at retirement (currently £1.65 million, prescribed to increase to £1.8 million in the tax year 2010/11 with no further increase planned until after tax year 2015/2016).

By way of background, pension schemes under pre-A-Day legislation (6 April 2006) were entitled to build retirement funds under a different funding basis, which did create pension funds in excess of £1.5 million as at 6 April 2006.

Legislation was introduced to provide that those who had or expected to have pension funds above the new lifetime allowance when they retired could opt out of the Government’s new pension saving regime by electing for enhanced or primary protection. If not, and their retirement funds were in excess of the revalued lifetime allowance at retirement, a 55% tax charge would be applied on the excess fund if taken as a lump sum.

Poor fund performance

Protection can be extremely useful for those clients who at present have funds over the lifetime allowance, but in the future this may not be so as their investment may perform poorly and therefore, they would have scope for additional contributions.

By way of an example, assuming an individual with a protected lifetime allowance fund of £3 million at retirement via primary protection witnessed extremely poor investment performance in his final year of employment, reducing the fund to £1.5 million. In this scenario he could make a tax relievable contribution of up to £1.5 million and avoid any recovery tax charges and potentially receive full tax relief to bring the fund up to its former level.

Naturally, there are some tax issues to be aware of in making this contribution; however, the regime does allow this. In the final year of employment/retirement the annual allowance (currently £235,000) does not apply, as long as full retirement benefits are drawn. The member would then be able to go into retirement and draw his pension commencement lump sum (previously known as tax-free cash) and retirement benefits.

(If there were still some years to go before retirement, the fund could be gradually topped up to its A-Day level, given that contributions in all but the final year of employment did not exceed the then annual allowance).

Accordingly, the deadline of 5 April 2009 should be foremost in our minds as a key planning opportunity/event for pension funds.

(Contribution by Adrian Mee of Mattioli Woods plc)

What is MTR?

MTR is a 90 minute monthly training course, held in London, Ipswich and Norwich – as well as a reference work.  Each Issue records the most significant tax developments over a wide range of subjects (see below) during the previous month, containing 30 to 40 items.  The aim is not necessarily to take the place of the journals, but rather to provide an easily digestible summary of them and, through the six-monthly Indexes, to build up, over the years, a useful reference work. 

The first aim, therefore, of MTR is to inform.  The second and subsidiary aim is to provide a monthly forum for the discussion of issues that tend to come up in professional practice, largely, though not exclusively, prompted by specific items in MTR.

Who should come to MTR? Does it attract CPD?

MTR is designed not primarily for the person who spends 100% of his/her time on tax, but rather for the practitioner (whether private client or company/commercial) for whom tax issues form part of his/her practice.  Attendance at MTR qualifies for 1.5 CPD hours for members of the Law Society, for 1.5 CPD points for accountants (if MTR is considered relevant to the delegate’s practice) and (subject to the individual’s self-certification) should also count towards training requirements for the CIOT.  For STEP purposes, MTR qualifies for CPD in principle, on the grounds that at least 50% of the content is trust and estate related.  
 
What is the content of MTR?

The material is drawn from HMRC press releases, Tax Bulletins, VAT business briefs, case reports and articles in the professional press.  Each item carries a reference as to source which can be followed up if necessary. 

The logic of the ordering of the 12 sections is as follows: first, Capital Taxation (viz 1. Capital Gains Tax, 2. Inheritance Tax and 3. Stamp Taxes).  Second, Personal Tax (4. Personal Income Tax).  Third, Business Related Matters (viz, 5. Business Tax, 6. Employment, 7. National Insurance and 8. VAT & Customs Duties).  And fourth, Miscellaneous (viz 9. Compliance, 10. Administration, 11. European and International and 12. Residue).     An annual binder is provided within the subscription cost.

Despite an inevitable element of selectivity, MTR aims to be catholic in its coverage – and this is reflected in the presentations where appropriate: there may well be NI, VAT or employment tax points of which the person advising mainly on estate planning (for example) should at least be aware.  That said, the London sessions at least tend to focus, by majority request, on estate planning issues: it is possible that in future one of the sessions might be geared more to company/commercial matters. 

How is MTR circulated?

The Notes are emailed to each delegate in the week before the presentations (and thus can easily be circulated around the office), with a follow-up four or five pages of practical Points Arising during the various sessions (whether in London, Ipswich or Norwich).

When and where is MTR held?

The London meetings take place at the National Liberal Club, One Whitehall Place, London SW1, on either the first or second Tuesday of the month, generally in the David Lloyd George Room.  There is a choice of four sessions: 9.00 - 10.30 (3 places available), 11.00 – 12.30 (6 places available), 1.00 – 2.30 (8 places available) and 4.00 – 5.30 (3 places available).

The Ipswich meetings take place generally on the first or second Wednesday of the month at the offices of Pretty’s solicitors 45 Elm Street, Ipswich 5.00 – 6.30pm (5 places available). 

The Norwich meetings take place at the Norfolk Club, Upper King Street, Norwich on the first or second Thursday of the month from 5.30 – 7.00pm (3 places available). 

Dates are fixed up to a year in advance and any one delegate from a firm can take up the firm’s place each month.  Attendance is limited to no more than 30 delegates in London and 25 delegates in Ipswich and Norwich (to make for ease of round table discussion).  The cost in London is £60 plus VAT, and in Ipswich and Norwich £50 plus VAT (billed every six months in advance).

How do I find out more?

For further details, visit www.matthewhutton.co.uk on Conferences & Seminars and then Monthly Tax Review – or email Matthew on mhutton@paston.co.uk.