SIPP. Been given bad advice? Annual allowance charge

dunstonh

lifecanbetough4 wrote: »

dunstonh thank you for your reply. I am literally shaking with a mix of regret/lack of knowledge/uncertainty/fear.

This isn't an example. This is what happened.

£40k in 24/3/2015. 2014/2015 allowance?
£30k in 26/3/2015. 2015/2016 allowance?
Claimed tax relief on the £70k in tax return.

Oh, that does change things. Effectively, you made a £70k pension contribution in 2014/15.

How much did you earn in the previous tax years?
How much pension did you pay in the previous tax years?
(for the benefit of others, I am looking to see if carry forward is available which would avoid an excess charge)

lifecanbetough4

dunstonh wrote: »

Oh, that does change things. Effectively, you made a £70k pension contribution in 2014/15.

How much did you earn in the previous tax years?
How much pension did you pay in the previous tax years?
(for the benefit of others, I am looking to see if carry forward is available which would avoid an excess charge)

I earned around 100k in 2013/14. But I wasn't registered to any pension so cannot carry forward.


Do you have a link to where it says PIPs must be alligned to tax years from 2011?

mania112

lifecanbetough4 wrote: »

I earned around 100k in 2013/14. But I wasn't registered to any pension so cannot carry forward.

Do you have a link to where it says PIPs must be alligned to tax years from 2011?

http://adviser.royallondon.com/pensions/technical-central/information-guidance/contributions-and-tax-relief/pension-input-periods-and-pension-input-amounts/

They don't have to be - but they are by default.

mania112

lifecanbetough4 wrote: »

It says, For plans that became registered pension schemes before 6 April 2011 the first pension input period runs for one day more than 12 months.


Oh crap, what the hell have I done, I feel like jumping off a cliff

BEFORE!

Besides, we're trying to determine if it was possible to change the default. I think so, but can't find anything 100% definitive.

mania112

If it was a bit earlier in the day I could have called Prudential's technical helpline - they're usually pretty good with this sort of thing.

What I would say is, don't rely on HMRC being right. Sounds stupid, but they're less knowledgeable than Providers and some Advisers to be honest. You're talking to a call centre at the first stage with HMRC.

The worst case scenario is that you've got a higher liability on your tax bill, nothing criminal or deliberately untoward has happened.

Let's get the answer and go from there.

dunstonh

The ability to retrospectively change the pension input date was also abolished on 19th July 2011.

HMRC don’t need to be told about nominations to change the end date of a pension input period.

So, they don't actually know your PIP end dates. You could tell them that you contributed the first payment and then nominated to change the end date to the 25th March 2015 and then made the payment on the 26th in the next PIP. it is possible that they will not ask for evidence of that transaction as it is an allowable transaction. HMRC don't often ask for evidence where the explanation for a transaction is allowable. Indeed, they may not even raise it as a point as many people are using carry forward and routinely paying over £40k and that is not reported to HMRC either. You just have to be able to explain what you were doing if asked.

mania112

The other thing to note is that if you DO have a charge, it's going to be over £2,000 so you can opt for the pension to pay the bill for you. It's called 'scheme pays'.

lifecanbetough4

dunstonh wrote: »

The ability to retrospectively change the pension input date was also abolished on 19th July 2011.

HMRC don’t need to be told about nominations to change the end date of a pension input period.

So, they don't actually know your PIP end dates. You could tell them that you contributed the first payment and then nominated to change the end date to the 25th March 2015 and then made the payment on the 26th in the next PIP. it is possible that they will not ask for evidence of that transaction as it is an allowable transaction. HMRC don't often ask for evidence where the explanation for a transaction is allowable. Indeed, they may not even raise it as a point as many people are using carry forward and routinely paying over £40k and that is not reported to HMRC either. You just have to be able to explain what you were doing if asked.

I don't like to hide anything. I want to sleep at night.

I am going to phone HMRC on Monday and explain. Do you think I will need to pay the annual allowance charge tax?

Or have I not done anything wrong?

dunstonh

I don't like to hide anything. I want to sleep at night.

You are not hiding anything. Indeed, the explanation of what you planned to do is exactly what I described. The bit you didnt do was change the pension input period end date. However, HMRC do not know that. Intention is important when looking at taxation. Did you intend to defraud HMRC by paying £70k into the pension in one PIP or did you intend to pay £40k in one PIP and £30k in another PIP? The latter is what you intended and HMRC allow that transaction.

I am going to phone HMRC on Monday and explain. Do you think I will need to pay the annual allowance charge tax?

Don't tell them anything unless they query it. If they query it, explain the transaction. In the unlikely event they ask for evidence then you contact the provider asking for evidence of your request to change pension input period. They will then give you the wrong date (in terms of what want). You then explain to HMRC that your provider failed to change the PIP (which is actually not dissimilar to what you said in your first post about the provider saying you could do it). HMRC will then decide whether they allow it or not.

You are not committing tax fraud or evasion as your intention was to do something allowed. it is a clerical error. If it gets to the evidence stage then HMRC will then have a decision to accept a clerical error or penalise you with that tax charge.

If you tell them on Monday that you paid £70k in one PIP then you are stuffed. No prosecution or criminal activity or anything like that. They will hit you for the tax.

So, one option may result in a tax charge. The other option will result in a tax charge. The only other thing is the length of delay in paying the tax charge. HMRC can add interest.

What contact have you had with HMRC about this already?

lifecanbetough4

dunstonh wrote: »

The bit you didnt do was change the pension input period end date.

I opened the first PIP on 24/3/2015 and they told me they closed it on 25/3/2015. I believe I used the 2014/2015 allowance in this PIP.

A new one was then opened and I believe I used £30k of the 2015/2016 allowance.

So Pip 1 was opened and closed within 48 hours. Pip 2 was then opened.
Where is the clerical error?


I have already spoke to HMRC about this but the agent didn't seem very knowledgeable as he dealt with all tax. He didn't know of PIPs and asked me to phone the pension helpline.