The Registered Pension Schemes (Enhanced Lifetime Allowance) Regulations 2006

Explanatory Note

(This note is not part of the Regulations)

Part 4 of the Finance Act 2004 deals with pension schemes.

The pension schemes legislation includes provision that an individual has a lifetime allowance on the amount of pension savings that may benefit from tax relief. An individual’s lifetime allowance is usually the standard lifetime allowance: but the legislation also contains provisions relating to an enhanced lifetime allowance. The enactments providing for an enhanced lifetime allowance specify that the enactment in question only applies if notice of intention to rely on it is given in accordance with regulations.

The pension schemes legislation also includes provision for a charge to income tax, to be known as the lifetime allowance charge. But paragraph 12 of Schedule 36 to the Finance Act 2004 provides, in certain circumstances, that there is no liability to the lifetime allowance charge: but only if notice of intention to rely on the paragraph is given in accordance with regulations.

These Regulations contain provisions which enable an individual to rely on the enactments providing for an enhanced lifetime allowance and on paragraph 12 of Schedule 36 to the Finance Act 2004. The Regulations also contain additional provisions of an administrative nature.

There are two preliminary regulations. Regulation 1 provides for citation and commencement and regulation 2 for interpretation.

The next group of regulations (regulations 3 to 8) make provision to enable an individual to rely on the particular enactments which provide for an enhanced lifetime allowance or (in the case of regulation 4) on paragraph 12 of Schedule 36 to the Finance Act 2004. Each of these regulations provides for the same general procedure to be followed. An individual who wishes to rely on the relevant enactment must give a notification to the Revenue and Customs on or before the closing date (as defined). If the Revenue and Customs issue a certificate to the individual in response to the giving of the notification, the individual may rely on the relevant enactment until the certificate is revoked, or until an amended certificate is issued. The individual may then rely, to the same extent, on the amended certificate. In the case of regulation 4, notice may be given to the Revenue and Customs that the individual no longer wishes to rely on the certificate.

Regulation 9 applies if an individual ceases to have the benefit of paragraph 12 of Schedule 36 to the Finance Act 2004, and operates to protect the individual from suffering disproportionate loss.

These Regulations then make additional provision of an administrative nature.

The next group of regulations makes further provision in connection with notifications. Regulation 10 deals with the form of notifications; and regulation 11 provides that an individual must preserve documents relating to the information given in the notification. Regulation 12 deals with the case where an individual gives a notification to the Revenue and Customs after the closing date, but had a reasonable excuse for not giving the notification before the closing date, and gives the notification without undue delay after the reasonable excuse ceased.

The procedure to be followed on the giving of a notification is dealt with in regulations 13 and 14. Regulation 13 provides that if the Revenue and Customs do not take any objection to the information provided in the notification, they must issue a certificate to the individual. If the Revenue and Customs take an objection, they must return the notification to the individual. Regulation 14 deals with the case where there is a dispute as to whether the Revenue and Customs are entitled to take an objection to the information provided in the notification. The individual may appeal to Commissioners.

The next group of regulations contains provisions relating to certificates. Regulation 15 contains general provisions. Regulation 16 permits an individual, in certain circumstances, to require information contained in two notifications or certificates to be combined in a single certificate (an “aggregate certificate”). Regulation 17 provides for the case where incorrect information is given in the notification, or in connection with the notification, and regulation 18 for the case where incorrect information is given in the certificate. Regulation 19 provides that an individual may require the Revenue and Customs to provide information which the individual no longer possesses.

The next group of regulations contains provisions relating to compliance. Where an individual has given a notification to the Revenue and Customs and the Revenue and Customs have issued a certificate to the individual, then, in certain circumstances, the Revenue and Customs may review the information given. Regulation 20 provides that the Revenue and Customs may begin a review of information given in the notification, or in connection with the notification, at any time within the year beginning with the day on which the notification was given. Regulation 21 provides that the Revenue and Customs may begin a review at any time if the Revenue and Customs have reason to believe that the information given in the notification, in connection with the notification, or in the certificate, either was incorrect or has become incorrect. Regulation 22 deals with the procedure to be followed on reviews. The Revenue and Customs must give notice to the individual requiring the production of information and documents; and the individual may appeal against the notice (regulation 23). Regulation 24 provides that the Revenue and Customs may revoke or amend a certificate in certain circumstances. The Revenue and Customs must give notice to the individual, who may appeal to Commissioners.

The final regulations are supplementary. Regulation 25 makes special provision for persons incapable, by reason of mental disorder, of managing and administering their property and affairs, and for persons suffering from physical disabilities. Regulation 26 provides that if an individual dies, then anything under these Regulations which could have been done by the individual may be done by the individual’s personal representatives.

A regulatory impact assessment in respect of the provisions of Part 4 of the Finance Act 2004 and subordinate legislation under it was published by the Board of Inland Revenue on 8 April 2004, and is available on HM Revenue & Customs website at www.hmrc.gov.uk/ria/simplifying-pensions.pdf or (for hard copies) by writing to the Ministerial Correspondence Unit, 1st Floor, Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG 2 1BB.