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HMRC Closes Pension Tax Loophole

by Jason Gorringe, Tax-News.com, London

31 July 2006

HM Revenue and Customs announced last week that it has amended the rules for the calculation of stand-alone pension lump sums in order to plug certain 'loopholes'.

The revisions target lump sums paid under transitional protection which constitute the whole of a person's rights under the pension scheme. The order sets out the circumstances in which such lump sums can be paid and provides rules covering transfers, amending articles 25 and 26 of The Taxation of Pension Schemes (Transitional Provisions) Order 2006.

According to HMRC:

"This order plugs various loopholes that could allow some individuals to take much larger tax-free lump sums than the legislation intends. To prevent the possibility of forestalling its provisions this order came into force on the 25 July 2006 which was shortly after it was laid."

"This Order works in the way that the original Order was intended to work in line with announced policy, and will not therefore affect those paying lump sums in normal circumstances."

The full text of the order amending the taxation of pension schemes can be found in the Tax News Resources section.

 

 






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