HMRC has shared further information on the changes to the Accounting for Tax returns that will apply to pension schemes impacted by the public service pensions remedy, following the laying of relevant regulations in parliament earlier this month.

The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 outline the changes to pensions tax treatment arising from the remedy in Part 1 of the Public Service Pensions and Judicial Offices Act 2022.

The regulations were made and laid in early February and aim to smooth the implementation of the McCloud remedy, after a High Court ruling found that the 2015 changes to public sector schemes were discriminatory on the grounds of age.

Following this, HMRC confirmed that a number of changes to Accounting for Tax returns, confirming, for instance, that where a member has a new or additional annual allowance tax charge as a result of the public service pensions remedy, the member may be able to use mandatory scheme pays.

Under the changes, if a member makes a scheme pays election for this extra charge, provided it is made in time it will be treated as a mandatory election, even if the pension input amount for the scheme is not more than £40,000 or the member’s annual allowance charge is less than £2,000.

HMRC also confirmed that where a member asks a scheme to pay a new or additional annual allowance tax charge, this charge must be reported on the Accounting for Tax return for the quarter following the quarter in which trustees receive the new scheme pays election.

Alongside this, HMRC confirmed that some members may be subject to an increased lifetime allowance charge as a result of the public service pension remedy and may need to report and pay extra tax, which will need to be reported on the Accounting for Tax return.

There will also be a number of new questions on the Accounting for Tax asking for further details in relation to both the annual allowance and lifetime allowance.

As a result of these new questions, HMRC confirmed that, for pension schemes impacted by the public service pensions remedy, the bulk upload CSV templates will change for annual allowance and lifetime allowance.

The functionality to compile or submit an Accounting for Tax return on the Managing Pension Schemes service will also be unavailable from 10 March until 16 March while the updates are made.

However, those pension schemes not impacted by the public service pension remedy, can continue to use the existing CSV templates, and will be given the option of both versions of the CSV templates.

Both versions of the template will be available on the Managing Pension Schemes service from 1 April 2023.

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