3 - HMRC Tax regime: Benefits, reliefs and overseas schemes Flashcards
What is the earliest date that benefits can be taken from pension schemes
55
What age will the min pension age be increased to in 2028? What Act includes legislation for such changes
57
Finance Act 2022
Who are exempt from new normal pension age
Public sector - firefighters/ police / armed forces
Can benefits be taken early if the person is ill health
Yes - if ill health resulted in member ceasing occupation
When can a lump sum be taken out as a result of ill health pension (taking pension out early)
Life expectancy of less than one year
How are years calculated to take benefits? E.g. if they are 45 birthday how long until they are 55
9 Years to go until age 55 and not 10
What are the 5 conditions for PCLS be taken
- Relevant person - provision of scheme pension, life time annuity/drawdown pension
- Member must not have used all lifetime allowance at time of payment
- Lump sum must be piad within a period beginning six months before and ending twelve months after member becomes entitled to relevant person
- Lump sum must be paid when member has reached normal minimum pension age
- The lump sum is not an excluded lump sum
What is PCLS normally lower of?
25% of capital value of benefits coming into payment
25% of available portion of member remaining lifetime allowance
Does a member receieve PCLS with UFPLS
NO
How is member pension income taxed under UFPLS
via PAYE
Can a UFPLS be taken after age of 75?
Yes but only on funds not crystallised before 75
If a member under 75 takes UFPLS what is the gross amount tested against?
Lifetime allowance under BCE 6
What are the choices members have if the gross amount of UFPLS exeeds there lifetime allowance
Reduce UFPLS amount
Take lump sum and receive the excess as lifetime allowance excess lump sum - taxed as pension income under paYE
Take UFPLS to available lfietime allowance - designate rest into flexi-acess drawdown
What is the difference in post 75 and pre 75 when trying to take out a UFPLS (Tax)
Pre 75
- Must have sufficient lifetime allowance to take full amount as UFPLS
Post 75-
Must have some lifetime allowance not necessary sufficient amount - then will have restriction on amount that will be paid tax free (will be taxed as pension income via PAYE)
What is Small Pots payment
£10,000 or less
Small pot payments information
- Testing against lifetime allowance
- Does it trigger MPAA
What is the tax treatment from uncrystallised benefits?
What if small pots payment is from crystallisde benefits?
Not tested against member lifetime allowance
Not trigger MPAA
Uncrystallised benefits:
25% Is received tax free
75% is taxed as member pension income via PAYE
Crystallised benefits:
All taxed as member pension income via PAYE
What is Trivial commutation lump-sum payment?
From Defined benefit arrangement “in payment money purchase in-house scheme pension”
If total benefitis held in DB/payment money purchase in-house scheme pension and value does not exceed commutation limit of £30,000 they may be paid a CASH LUMP SUM rather than income
Can uncrystallised DC funds be taken as a trivial commutation lump sum?
No as a member can take any amount of these funds as an UFPLS (subject to lifetime allowance)
What is the tax treatment of serious ill-health lump sum pre and post 75
Pre 75:
Made tax free upt to lifetime allowance - rest taxed as pension income under PAYE
Post 75 - entirity taxed as pension income under PAYE
What are the two options that registered pension schemes are able to pay income?
Secured pension
Drawdown pension
How is income secured in a secured pension
Through scheme pension or buying lifetime annuity
Is the purchase of flexible annuity a trigger event for MPAA
yes
How are drawdown pensions taxed?
As member pension income via paye
What are the two types of drawdown pension?
Capped Drawdown
Flexi-access drawdown
When was capped drawdown stopped
Before 06/04/2015 - and not possible to set up a new one since then
What is the time period in which death benefits must be designated
Two year period
What is the tax treatment of lump- sum death benefits paid from uncrystallised/unused funds
Tax free before 75
Taxed after 75
Special lump-sum death benefit charge of 45% (outside two year window/75+)
How is dependent scheme pension taxed
As dependent pension income via PAYE whether member dies before aged 75 or after
What is the inheritane tax treatment of death benefits
If beneficiary listed no IHT
What is two forms of transitional protection?
Primary/ Enhanced
What is Primary protection
Over £1.5mill at 05/04/2006
How do you calculate primary protection factor:
(Value of pension rights (05/04/2006) - 1.5m)/ 1.5m
What is fixed protection 2012
1.8million
What is fixed protection 2014
1.5 million
What is fixed protection 2016
1.25million
How was elections for fixed prtection 2016 made
Online and no deadlines which applications must be received
What is individual proteciton 2014
Aimed at individuals who did not hae primary protection but had pension excess of 1.25mill on 05/04/2014. - it gave them lfietime allowance max to 1.5 mil.
What are the different ways for lifetime allowance testing purposes for individual protection 2014
Pre-A DAY pension - 25:1
Schgeme pension after 05/04/2016 - 20:1
Uncrystallised DC fund: Value of fund
What is individual protection 2016
Prtected lifetime allowance of max 1.25mill on 05/04/2016
What is the entitlement received by ex-spouse called
Pension credit
What is the loss in entitlement suffered by member of pension scheme called
Pension debit
What is the taxation treatment of pension fund investments
No liabilities to income tax arises in respect of income derived from investments or deposits
No CGT arises on gains / no allowance for losses
Trading income is taxable
What is the unauthorised payment charged taxed at
40%
Who is responsible for surchargeable unauthorised member payment
Member if alive
Person who receives payment (if member is dead)
Who is responsible for surchargeable unauthorised employer payment
Sponsoring employer
What is scheme sanction charge
40% of chargeable payment
or lower of:
amount of unauthroised payments charge that has been paid
25% of scheme chargeable payments that are tax paid
What is de-registration charge and who is responsible for this
40% paid by scheme administrator
What are the two overseas pension schemes?
Qualifying recognised overseas pension schemes
Currently relieved non-UK pension schemes
What is a QROPS
Recognised by HMRC
Recognised transfer
How do you transfer a UK pension fund to QROPS
what BCE is it?
under bce 8
What tax charge is there on transfers between a
UK registered pension scheme to QROPS
QROPS to QROPS
25% overseas transfer charge
What is the member payment charge
If a QROPS makes payment from former UK funds that would not have been permitted under UK scheme
(transfer to overseas pension scheme that is not QROPS or payment of an excess lump sum)
When are benefits taken from a RNUKS(relevant non uk scheme) taxed in uk
If total withdrawls during time is more than £100k
What is period of temporary non UK residence before 06/04/2017
5 years
What is period of temporary non UK residence after 06/04/2017
10 years
