Do capital gains have to be paid on this?

TUVOK

I have been informed by the representatives of my late Mother and Fathers works pension fund that the fund has been wound up as insolvent.
They inform that there is about a £600-00 amount to be paid to me as a result of this as I am the beneficiary of their will.
Do I have to pay capital gains etc on this payment, or should I just notify HMRC of the payment and await their reply?
Also, I pay any tax via the self assessment process on-line, would I have to enter this amount on my annual submission or would I be able to make a one off payment regarding this?

TUVOK

I should mention as it is relevant that my parents both dies over 7 years ago.
Thanks for any/all replies.

TUVOK

Can any one help please?

DairyQueen

TUVOK said:

I have been informed by the representatives of my late Mother and Fathers works pension fund that the fund has been wound up as insolvent.
They inform that there is about a £600-00 amount to be paid to me as a result of this as I am the beneficiary of their will.
Do I have to pay capital gains etc on this payment, or should I just notify HMRC of the payment and await their reply?
Also, I pay any tax via the self assessment process on-line, would I have to enter this amount on my annual submission or would I be able to make a one off payment regarding this?

I think that failure to receive a reply may be because the info that you provide is confusing.

I will have a stab:

This looks like a Defined Benefit (DB) scheme that paid an annual income to the retired member (and his/her spouse/dependents on death).

Firstly, a (married?) couple would only be members of a 'works pension' concurrently if they both worked for the same company at some point in their careers. Was this the case? Or did one parent die first and the other then receive widow's benefits from the late spouse's pension until s/he died? 

Were you a dependant of the pension scheme member at the time that s/he died? Typically a 'dependant' is a child of the deceased (usually aged under 18 or under 21 if in full-time education).

To clarify your situation could you advise:

- Who was the employer who provided the pension?
- Who was the pension scheme member (father/mother/both)?
- Which parent died first (father or mother)? and when?
- When did the second parent die?

I assume that you were the beneficiary of surviving parent's will. Were you the executor? When the executor contacted the pension scheme at the time of the second death do you know whether payments were finalised?

Off the top of the head suggestion....

The scheme member died (father?) and the spouse (mother?) received a widow's pension. On the death of the widow the scheme did not correctly settle payments and a balance was due to the estate. The scheme has since discovered this omission and is now sending the cash to the executor/beneficiary of her estate. 

If this is the scenario then no CGT is due but there could be an inheritance tax liability depending on the value of late parent's estate.

Or your scenario could be something quite different.

Marcon

If you haven't used this year's CGT allowance (£12,300), CGT is irrelevant.

Pensions fall outside the estate where the payment is made at the discretion of the trustee, so I'd go back to the scheme and double check that this is a discretionary payment. I'd wager that it is, so that rules out any IHT liability.


If income tax is payable, that is normally deducting by the paying scheme. I'd wait to see what paperwork you get with the payment.

Just to be quite sure, enter it on your self assessment form under the section for 'any income not declared elsewhere' with a note in the comments box saying you believe this should not be subject to tax because it is a discretionary payment from the trustees of your late parents' pension scheme.

TUVOK

Marcon, thank you for your reply.
Both of my parents worked for the same firm and they were both members of the same pension scheme, and I am the beneficiary under their wills.
The pension fund after their death became insolvent and the payments in question which have taken over 7 years to happen, are the proceeds from a winding up procedure.
The payments have been made free of tax with just a paragraph to state that is up to me to contact HMRC.

TUVOK

To Dairy Queen.
Thank you for your reply, the details you asked for are:
Yes, it was a DB scheme
Both of my parents worked for the same firm and were in the same pension scheme.
No, I was not a dependent at the time of their death.
The firm they worked for was NORTEL
My Mother died first and my Father died 2 days later.
Myself and my sister are joint beneficiaries and we were not the executors.
I hope that this answers all of your queries?
Thank you for responce.

Brynsam

TUVOK said:

Both of my parents worked for the same firm and they were both members of the same pension scheme, and I am the beneficiary under their wills.
The pension fund after their death became insolvent and the payments in question which have taken over 7 years to happen, are the proceeds from a winding up procedure.
The payments have been made free of tax with just a paragraph to state that is up to me to contact HMRC.

The Nortel position is extremely complicated, so I'd put the payment on your self assessment form, with a note saying just this, making sure you mention it is in the Nortel scheme.

savingmore

I recommend you phone the HMRC helpline.  they are very helpful and can guide you, or as has been said, put on self assessment form with explanation and you can attach any documentation to the return for explanation.