Backdated pension not spread over tax years, taxed as one lump sum??? (McClod Remedy)

CedricsDad

My issue, briefly, is:

a. Volunteered to have my Armed Foces Pension reviewed iaw McCloud Remedy.

d. Awarded extra pension backdated to 2019, grateful but awarded in one lump sum. HMRC taxed as one lump sum this tax year.  Now in top tax band. Paymaster agreed that tax liability should be spread over the tax years since 2019, advised I contact HMRC. 

e. Contacted HMRC who are refusing to spread tax liabilility over the tax years since 2019, advised to contact Paymaster for them to contact HMRC. (Done, but long delays) Paymaster generally disinterested. I have a letter from Paymaster giving details of additional pension payments since 2019 as a result of McCloud.

f.  Has anyone any suggestions on how I proceed......I contacted Paymaster over two weeks ago but nothing heard......should HMRC spread the tax liability since 2019, or is it just tough luck?
I estimate I have overpaid £15 000 as the lump sum has been taxed at a high level. 

xylophone

e. Contacted HMRC who are refusing to spread tax liabilility over the tax years since 2019, advised to contact Paymaster for them to contact HMRC. (Done, but long delays) Paymaster generally disinterested. I have a letter from Paymaster giving details of additional pension payments since 2019 as a result of McCloud.

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim75020

Pensions paid in arrears

If a pension provider discovers a long-standing underpayment of pension, the underpayment is calculated and paid in a single sum. Where the provider is required to operate PAYE, they operate it on the lump sum arising which may give rise to higher rate liability for a pensioner who is usually a basic rate taxpayer. In this situation, the pensioner should contact HMRC at the end of the tax year in which the arrears were paid and supply a schedule showing the years to which underpayments are attributable (on the accrual basis), asking for the payments to be related back to the relevant years. HMRC will spread the payments back over the relevant years and recalculate liability. Underpayments in the earlier years may be set-off against the resulting overpayment in the year of the lump sum payment.

molerat

As above

Paymaster can only tax as a lump sum in the year it is paid, that is their only option.

It is up to you to request HMRC apportion the payments according to the tax year they relate.

Paymaster have provided you with a schedule as to the apportionment of the lump sum.

HRMC should accept that evidence to recalculate your tax for the appropriate years.

You need to contact HMRC again and point them to their own internal manual.

uknick

Whilst not a pension lump sum, my partner did this for a employment tribunal settlement lump sum.  We submitted documents spreading the amount over the years it applied to in December but she didn't get the cheque until July the following year.  HMRC said they have to wait until the end of the tax year just to make sure no other taxable income was forthcoming.

CedricsDad

xylophone said:

e. Contacted HMRC who are refusing to spread tax liabilility over the tax years since 2019, advised to contact Paymaster for them to contact HMRC. (Done, but long delays) Paymaster generally disinterested. I have a letter from Paymaster giving details of additional pension payments since 2019 as a result of McCloud.

Pensions paid in arrears

If a pension provider discovers a long-standing underpayment of pension, the underpayment is calculated and paid in a single sum. Where the provider is required to operate PAYE, they operate it on the lump sum arising which may give rise to higher rate liability for a pensioner who is usually a basic rate taxpayer. In this situation, the pensioner should contact HMRC at the end of the tax year in which the arrears were paid and supply a schedule showing the years to which underpayments are attributable (on the accrual basis), asking for the payments to be related back to the relevant years. HMRC will spread the payments back over the relevant years and recalculate liability. Underpayments in the earlier years may be set-off against the resulting overpayment in the year of the lump sum payment.

My thanks to you.....apologies for the delay.....managed to get them to see sense and finally received a cheque to account for my overpaid tax.  Your reference demolished their argument. Thanks again.