In FPS Bulletins 71- July 2023, 72 – August 2023 and 73 – September 2023 we covered various elements of the HMRC member tax calculator.

The calculator is designed for members to correct their tax position if they have been affected by the age discrimination remedy.

The service will:

  • work out any repayments that are due for a lifetime allowance or annual allowance charge an individual has previously paid.
  • work out new, reduced or extra lifetime allowance or annual allowance charges that an individual may have to pay.
  • submit information for HMRC to review.

Once an individual has submitted this information, HRMC will then contact an FRA through their single point of contact (SPOC) who has registered for the Secure Exchange Data Service (SDES) through the SDES.

An FRA will then need to:

  • repay any overpaid tax charges the individual paid from 6 April 2015 to 5 April 2019.
  • increase the individuals pension benefits to cover the amount of repayment due for overpaid tax charges they paid on your behalf.

If an individual has extra tax charges to pay, a notice will be sent to the individual by post. If they are due a refund for tax charges, HMRC will pay this to the individual using the bank details they provide. If the FRA paid the tax charges through scheme pays, the refund will be made to the FRA.

HMRC’s McCloud guidance and digital service are now live. Please see links to the different products below:

The remediable Service Statement - covering letter has been updated to include a link to the member tax calculator. If you are using your own version of this letter, please ensure that you include it.

Pension Saving Statements and Pension Input Amounts

HMRC have provided clarity regarding the specific years for which Pension Saving Statements (PSS’s) and revised PSS’s will be needed in order for an individual to accurately calculate compensation due, and tax charges due/owed to them. An individual would require both original and revised PSS’s for tax years 2012-13 to 2021-22, alongside a PSS for 2022-23 to ensure an accurate revision of their tax position and compensation due in all cases.

Further information regarding specific cases has been provided below:

  • In some cases, not having both original and revised PIA’s from all remedy years, plus 2012-15 (where the member has not paid an AA charge in 2015-16), will result in an inaccurate revision of the member’s tax and/or compensation position.
  • It is impossible to ascertain, without seeing all of an individual’s tax and pensions information in one place, whether providing incomplete information will lead to an inaccuracy in their calculation. The only place where all of that information will be brought together is the calculator, and so it is only at the point the individual enters all of the relevant information into the calculator that anyone can know for certain whether original and revised Pension Input Amount’s (PIAs) from all remedy years are needed or not.
  • Therefore, the service requires original and revised PIAs for all remedy years (apart from 2012-15 where member has paid an AA charge 2015/16) to guarantee an accurate calculation for the member.
  • HMRC cannot tell individuals to omit information when we know that this could lead to an inaccuracy in their tax or compensation position. Consequently, HMRC guidance will tell an individual that they need original and revised PIA’s for all tax years from 2012-2023 (or 2015-2023 where appropriate) and the individual will need this information to use the digital service.
  • Where an inaccurate revision is calculated, due to incomplete information being provided, this will often be to the detriment of an individual.
  • Therefore, while schemes are not mandated to automatically issue statements except in circumstances where they are required to by statute, an individual who has breached their AA threshold in any remedy year is likely to request PSS’s for all remedy years, and (in many cases) 2012-15 too, where they haven’t automatically been provided – and an individual has a legal right to do this.

It is not for HMRC to decide on pension schemes’ approach to issuing PSS’s for remedy years, but we trust that the above clarification will help schemes to decide.

HMRC has provided examples showing some scenarios in which incomplete information can lead to inaccurate outcomes in both years prior to and after the year of a charge.