HMRC Recycling Rules

jamesd

TH1878 wrote: »

3) Axa looked into this on our behalf and, we believe, there is not one instance of HMRC taking anyone to court over this.

Thanks. Any signs that HMRC have tried to enforce the rules short of court?

It's somewhat frustrating to now have a recycling rule that will only catch mundane pension recycling because the annual allowance now in effect protects those with largest pots from triggering it, due to the relative value of 30% of a large tax free lump sum and the 40k annual allowance. Anyone with a pot of 666,667 or more who takes max PCLS can't trigger the recycling rule without using carry-forward, so they get to just ignore the rule and recycle as much as they like up to the annual limit. While those with banal pots can be caught by it. So we have a rule that can't catch out those it was supposedly originally intended to address.

kidmugsy

jamesd wrote: »

So we have a rule that can't catch out those it was supposedly originally intended to address.

Good Lor', Poirot, it must have been Gordon Brown.

peterg1965

jamesd wrote: »

Yes, they are. All contributions to a money purchase pension in your name are counted. contributions to defined benefit are not counted (for this or the money purchase annual allowance introduced in April, they do count towards the overall annual allowance).

The amount arriving in the pension is what counts. So yes, it includes reliefs, and any employer NI that ends up in the pension.

You clearly are starting to understand it well. That is the correct reaction.

It's crazy that I could potentially have to stop all pension contributions including those given to me by an employer as part of a work based DC scheme. This is all about pension lump sum recycling , surely it would obvious to HMRC that my new employers contributions have absolutely nothing to do with lump sum received via another pension.

When the AA was £255,000 recycling was a real possibility, with such a modest AA these days, as you say James, it really doesn't serve the same purpose.

TH1878

jamesd wrote: »

Thanks. Any signs that HMRC have tried to enforce the rules short of court?

I will ask them next time I speak to them but I don't believe there are

bigadaj

peterg1965 wrote: »

It's crazy that I could potentially have to stop all pension contributions including those given to me by an employer as part of a work based DC scheme. This is all about pension lump sum recycling , surely it would obvious to HMRC that my new employers contributions have absolutely nothing to do with lump sum received via another pension.

When the AA was £255,000 recycling was a real possibility, with such a modest AA these days, as you say James, it really doesn't serve the same purpose.

Just to play Devils advocate....

It could be argued that pensions are about providing for retirement, and so the fact that they are taken in different forms and at various times, with the benefit of tax relief on the way in and a tax free lump sum on the way out, is in itself a form of manipulation of their actual intended purpose. If it's allowed under the rules then that's fine, but can't see too many average people having a lot of sympathy with your issues. From a governments perspective they are largely about encouraging people to be responsible about their future and old age, and so their primary purpose is to avoid many from being dependent on state handouts. You are well beyond that point so can't see the government being too concerned either way, as long as the law and interpretation of the rules is being followed.

To describe £40000 per year as being a modest sum to invest into a pension also obviously puts you into an extremely limited section of the population, typical sums paid into dc pensions would be 10% of the limit.

peterg1965

Understand all that, and do not disagree. Modest was a poor choice of word there, it is 'modest 'only in relationship to the £255k sum it used to be.

Pheaps

Perhaps HMRC have not taken anyone to court because the rules are impossible to apply...? Very difficult to prove someones intentions. And the wording is so unclear and ambiguous. But I don't really want to be their test case!