January is not the start of the year in the planning world – it’s the beginning of the last quarter of the tax year. A time when those who have not already done so, are looking for and making the most of the tax planning opportunities available in the system, many of them based around making pension contributions.

Tax year end can be a bit like groundhog day with the same things coming through every year – and quite rightly, efficient tax planning is important and people’s circumstances change from year to year.

But this is a tax year end like no other, there are things that are a little different. One being that we are running up to a reduction in the Lifetime Allowance (LTA).

Reduction in Lifetime Allowance

The protection planning issues surrounding the reduction, as well as the new Individual Protection 2014, are covered in Prudential’s Oracle newsletter with more details in the Technical Centre at www.pruadviser.co.uk.

It’s worth reminding ourselves of the high level rules as there may be some urgent business to attend to.

The Lifetime Allowance (LTA) reduces to £1.25m from 6 April 2014. A new form of protection – Fixed Protection 2014 (FP14) – is available for those with funds over, or expected to be over, £1.5m at retirement who do not want to continue to save into their pensions.

Important criteria apply for an individual to benefit from FP, including:

No contributions to defined contribution (DC) schemes can be paid from 6 April 2014
Benefit accrual in defined benefit (DB) schemes will have to stop before 6 April 2014. To retain FP, benefit increases are only allowed by up to CPI inflation or the rate of increase for deferred members under the scheme rules at 11 December 2012

Applications must be with HMRC by 5 April 2014
Those with Enhanced and/or Primary Protection or Fixed Protection 12 cannot also have FP

There are no exceptions to the application deadline. Court cases, including Scurfield v Revenue & Customs [2011] UKFTT 532 and Platt v Revenue & Customs [2011] UKFTT 606, have highlighted this.

Both cases involved late applications made to HMRC for protection from the LTA, in connection with the A-Day changes in April 2006. HMRC refused the applications because they were submitted after the deadline.

In both cases, the taxpayer claimed there was a reasonable excuse for late submission. In both cases the taxpayer lost. The cases are reminders that planning is crucial in order to prevent pension benefits suffering unnecessary tax charges.

Ensuring the application is submitted on time should be quite easy and can be left relatively late.

Submitting the form on time should be the easy part, but make sure that schemes/ employer / providers are contacted in plenty of time to get final information and also to confirm the notice requirements to prevent any post 5 April contributions or accrual.

And of course, to get your final top ups in!

So, tax year end can be busy, and this one is a little different, there is the added complication this year of those with protection requirements.

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