Pension contributions can be used to relieve LC19

[Loan Ranger]

Why not just read HMRC's guidance on it that I posted earlier: https://www.gov.uk/hmrc-internal-man...nual/ptm133810

You'll get a lot clearer view there than by asking questions here.

That page links to some examples.
https://www.gov.uk/hmrc-internal-man...nual/ptm133850

My take on this is that HMRC will treat either of the following as triggering the recycling rule.

• Withdraw a lump sum.
• Make a larger than normal* contribution to a pension.

• Make a larger than normal* contribution to a pension.
• Withdraw a lump sum.

* based on previous years' contributions

I imagine the withdrawal and contribution would have to be separated by several years to be ok.

[starstruck]

Why not just read HMRC's guidance on it that I posted earlier: https://www.gov.uk/hmrc-internal-man...nual/ptm133810

You'll get a lot clearer view there than by asking questions here.

Yes, sorry, being lazy. Don't need answers, was just curious, doesn't affect me as I'm decades away from retirement (unfortunately)

[Albert49]

That page links to some examples.
https://www.gov.uk/hmrc-internal-man...nual/ptm133850

My take on this is that HMRC will treat either of the following as triggering the recycling rule.

• Withdraw a lump sum.
• Make a larger than normal* contribution to a pension.

• Make a larger than normal* contribution to a pension.
• Withdraw a lump sum.

* based on previous years' contributions

I imagine the withdrawal and contribution would have to be separated by several years to be ok.

I read it differently specifically this:
"Circumstances where the recycling rule does not apply
An individual might pay significantly greater contributions as part of normal retirement planning and might simply fund those contributions from the sale of investments, deductions from salary, salary sacrifice, redundancy sacrifice or from existing savings. A pension commencement lump sum might be an integral aspect of the increased contributions in that one of the reasons for increasing contributions is to receive a larger lump sum. The recycling rule will not apply in these circumstances unless the individual intended to use that pension commencement lump sum as the means of making those increased contributions, whether in a direct or indirect way....
The recycling rule does not apply where an individual takes a pension commencement lump sum and, when taking that lump sum, had no intention of using the lump sum as a means, whether directly or indirectly, to pay contributions into a registered pension scheme. This is because the recycling rule applies only where the recycling was planned before the first relevant transaction."

For example if I have 80K in an ISA, withdraw it , pay it into my pension which already has £300K in, which makes the pension now worth £400k (300 + 80 + 20 tax relief), I subsequently withdraw a lump sum of £100K , which i use to pay a tax bill (or buy a big car), but do not use it to pay into my pension, why is it not covered by the above ?
I am making a large contribution to offset LC tax, doing so increases the lump sum I can withdraw at a later date , but that is not the reason for making the large contribution (though according to the above this is also a valid reason for doing so), I can afford to make the large contribution without the subsequent withdrawal , so I fail to see how this is recycling.

[Loan Ranger]

I read it differently specifically this:
"Circumstances where the recycling rule does not apply
An individual might pay significantly greater contributions as part of normal retirement planning and might simply fund those contributions from the sale of investments, deductions from salary, salary sacrifice, redundancy sacrifice or from existing savings. A pension commencement lump sum might be an integral aspect of the increased contributions in that one of the reasons for increasing contributions is to receive a larger lump sum. The recycling rule will not apply in these circumstances unless the individual intended to use that pension commencement lump sum as the means of making those increased contributions, whether in a direct or indirect way....
The recycling rule does not apply where an individual takes a pension commencement lump sum and, when taking that lump sum, had no intention of using the lump sum as a means, whether directly or indirectly, to pay contributions into a registered pension scheme. This is because the recycling rule applies only where the recycling was planned before the first relevant transaction."

For example if I have 80K in an ISA, withdraw it , pay it into my pension which already has £300K in, which makes the pension now worth £400k (300 + 80 + 20 tax relief), I subsequently withdraw a lump sum of £100K , which i use to pay a tax bill (or buy a big car), but do not use it to pay into my pension, why is it not covered by the above ?
I am making a large contribution to offset LC tax, doing so increases the lump sum I can withdraw at a later date , but that is not the reason for making the large contribution (though according to the above this is also a valid reason for doing so), I can afford to make the large contribution without the subsequent withdrawal , so I fail to see how this is recycling.

I would be very careful with this.

If you make a large contribution and withdraw a large lump sum, HMRC may well query it.

If I were you, I would seek expert advice from a pensions advisor.

[phil@pmtc]

HMRC loses court battle over blocked pension relief


Not had time to read through yet but seems interesting. Looks like payments no longer have to be cash

[simran]

Your total income in the 2018/19 tax year will be your salary plus the loans.

Eg. your salary next year will be £50k. You received loans of £100k, in your previous contracting days, through a scheme. You'll have to declare £150k through self-assessment.

Anything you pay into a pension will offset the tax.

I was also planning to make lump sum contribution to the pension to offset the tax for my SelfAssessment 2017-18.
However IFA advised me that I can only claim tax relief for PAYE income in the self assessment. If we declare loan amount as other income (its not part of PAYE) so this can't be used for pension relief.

So for example: if Umbrella paid 15K PAYE and trust paid 85K loan amount. The tax relief can only be claimed for 15K pension contribution in Self Assessment as loan is being placed as other income in SATR.

Please correct anyone if thats not right as this may help many of us.

[Loan Ranger]

I was also planning to make lump sum contribution to the pension to offset the tax for my SelfAssessment 2017-18.
However IFA advised me that I can only claim tax relief for PAYE income in the self assessment. If we declare loan amount as other income (its not part of PAYE) so this can't be used for pension relief.

So for example: if Umbrella paid 15K PAYE and trust paid 85K loan amount. The tax relief can only be claimed for 15K pension contribution in Self Assessment as loan is being placed as other income in SATR.

Please correct anyone if thats not right as this may help many of us.

The IFA is correct but this thread is not about that.

The thread only concerns the 2019 loan charge.

The charge taxes all outstanding loans on 5 April 2019 as though they are earnings in 2018/19. You can get pension tax relief on this.

[starstruck]

Does anyone have any idea when the details of the LC reporting and payment process will be provided? It's not clear to me how I will need to report the loans (e.g. is it done on my tax return or via some other mechanism?) or how will payment be collected (e.g. via normal self assessment or a separate demand).

I ask because having done my calculations including pension payments etc. I have sort of assumed it will all be happening via self assessment, but am slightly concerend that it will be done separately which then raises concerns like, will my accountants be able to do my tax return as usual?

[Delendog]

Does anyone have any idea when the details of the LC reporting and payment process will be provided? It's not clear to me how I will need to report the loans (e.g. is it done on my tax return or via some other mechanism?) or how will payment be collected (e.g. via normal self assessment or a separate demand).

I ask because having done my calculations including pension payments etc. I have sort of assumed it will all be happening via self assessment, but am slightly concerend that it will be done separately which then raises concerns like, will my accountants be able to do my tax return as usual?

looking at the legislation and timeline for reporting loans I expect it will not be via self assessment as the deadline for loan reporting is well in advance of the self assessment deadline. Others are suggesting that they think HMRC will provide some type of online form.

[regron]

Does anyone have any idea when the details of the LC reporting and payment process will be provided? It's not clear to me how I will need to report the loans (e.g. is it done on my tax return or via some other mechanism?) or how will payment be collected (e.g. via normal self assessment or a separate demand).

I ask because having done my calculations including pension payments etc. I have sort of assumed it will all be happening via self assessment, but am slightly concerend that it will be done separately which then raises concerns like, will my accountants be able to do my tax return as usual?

I have contacted HMRC asking this exact question around how it will be reported.

looking at the legislation and timeline for reporting loans I expect it will not be via self assessment as the deadline for loan reporting is well in advance of the self assessment deadline. Others are suggesting that they think HMRC will provide some type of online form.

The big question I would like answering is whether or not the demand that comes, will be subject to appeal. A question I have also put to HMRC and await a response.