Operating PAYE correctly on pension flexibility payments
05 July 2016
Pension schemes newsletter 67 highlights that when making pension flexibility payments, some pension scheme administrators are still treating these as annual payments and calculating PAYE on a month 12 basis instead of week 1/month 1 basis.
‘Flexibly accessed payments are not annual payments. You should tax these payments using either the emergency code on a week 1/month 1 basis or, where you have a current year P45; using that code on a week 1/month 1 basis.
In cases where the fund has not been extinguished, we will then issue a tax code to operate against future payments.
This applies to pension flexibility payments from 6 April 2016 onwards.’
Furthermore, HMRC also report Real Time Information (RTI) submissions from pension scheme administrators and providers who are not yet using data items 168, 171, 173 and 174 to report pension flexibility payments and pension death benefit payments. The Pension schemes newsletter 67 provided a reminder that these data items are mandatory where schemes have made these types of payments.
Failing to complete the appropriate data items on RTI full payment submission, could impact on pension scheme customers who may contact HMRC to reclaim a repayment of overpaid tax. HMRC records will not show that a payment has been made and will not reflect that any tax is due back to the customer.
If you need to access the pension schemes helpline the new number is 0300 123 1079. A number of old HMRC pension letters have the old telephone number (0845 600 2622) on them. Letters are being updated to replace this with the current helpline number.
The correct telephone number for the Pension Schemes Helpline is Telephone 0300 123 1079