Civil Service Pension & Tax

Taylor2000

@Marcon

Thank you for the information you posted this morning.

However, as @NorthYorkie mentioned HMRC may charge late payment interest and penalties and I wonder how much of the tax saved by reallocation would be eaten up by this? I really have no idea how this all works and would be grateful if anyone with more knowledge could explain.

Taylor2000

DE_612183 said:

have you got two accounts? @Catonthemoon and @Taylor2000

I'm sorry but I don't understand what you mean? 

DE_612183

Taylor2000 said:

DE_612183 said:

have you got two accounts? @Catonthemoon and @Taylor2000

I'm sorry but I don't understand what you mean? 

no worries - guess it's me getting confused

Marcon

Taylor2000 said:

@Marcon

Thank you for the information you posted this morning.

However, as @NorthYorkie mentioned HMRC may charge late payment interest and penalties and I wonder how much of the tax saved by reallocation would be eaten up by this? I really have no idea how this all works and would be grateful if anyone with more knowledge could explain.

For some people, if the pension had been paid to them in the year to which they became entitled to it, it might have been entirely tax free because they had 'unused' personal allowance available - so no interest or penalties would be due.

Otherwise you wouldn't (normally) opt for reallocation unless the backdating pushed you into a higher tax bracket, and it's then a question of common sense. If you are a few pounds into the 40% tax rate, then unlikely to be worth doing for purely tax saving reasons. On the other hand, if you have a thumping tax bill...

I'll leave @NorthYorkie to explain how and when interest and penalties might be payable and how 'all this works'. They raised the points so will doubtless be able to provide the appropriate references to the HMRC tax manual etc.
 

Taylor2000

@NorthYorkie said

 "However this can get messy and involve the Revenue making discovery assessments with the possibility of charging interest and penalties (i.e you were entitled to income in those years on which you didn't notify them that you were liable to tax.)"

As Marcon said could you kindly "explain how and when interest and penalties might be payable and how 'all this works'. They raised the points so will doubtless be able to provide the appropriate references to the HMRC tax manual etc."

NorthYorkie

As its over a month since Catonthemoon posted anything it seems a bit academic to continue this debate. However I would make the point that there have been references to him/her 'deferring' this pension. This is not the case. In my view a deferral (if such was possible) would not just have deferred payment of the pension, it would have deferred entitlement to it. But, as others have previously explained, he was entitled to the pension from day 1 and made a conscious decision to prevent it from being paid and to claim means-tested benefits instead. He could have brought the pension into payment at any time in the previous 13 years.
There has been a failure to notify liability to tax and therefore potentially HMRC could levy penalties. For a readable summary of these penalties see Last minute: Late tax return notification - www.rossmartin.co.uk. Note that the penalties can be mitigated if the taxpayer has a 'reasonable excuse' for the failure.