In our previous article, we looked at the McCloud Remedy, what it was and what you needed to know. Tom Slevin, Client Services Director, has now outlined how any changes are to be reported to HMRC.
Over to Tom…
The McCloud Remedy is going to change the pension input figures for affected pension members from 1st April 2015 to 31st March 2022 (the remedy period). Pension input is the difference for tax purposes between the closing value of the pension at the end of the pension year and the opening value of the pension at the start of the pension year. Where the pension input is more than the available annual allowance, the taxpayer has an income tax charge on the pension input amount above the available annual allowance.
For some members, they may have paid (or they may have opted for the scheme to pay) an annual allowance tax charge for one year or for multiple years in the remedy period. With the pension input figures changing for the period from 1st April 2015 to 31st March 2022, it is likely that there will be a change in tax due and for many members who paid a tax charge, there is likely to be a reduction in tax due.
HMRC have implemented a service (called the ‘Calculate your public service pension adjustment service’) to submit amended calculations to them and either pay any tax due for the 2019-20 to 2022-23 tax year or be repaid for any tax overpaid in the remedy period.
The HMRC online service can be found here.
What do I need to be able to determine whether I owe or am owed any tax?
Before we can look at whether any additional tax is due for 2019-20 to 2022-23 or any tax is due back for 2015-16 to 2021-22, the NHS pension scheme will need to send a remediable service pension savings statement to you.
This statement will detail the recalculated pension input for you in the legacy scheme from 2012-13 to 2021-22 and should then be accompanied by a pension savings statement for 2022-23.
Once these statements have been received, we can look at the pension input for each year, compare these to the previously reported pension input and determine whether there has been any tax overpaid or underpaid in previous years.
On the HMRC service, the pension input amounts will need to be included for the 2012-13 to 2022-23 tax years. We will also need your tax returns for the period as threshold net income, adjusted net income and any annual allowance tax charges already paid will need to be reported to HMRC with the revised pension input figures.
Once these are entered by HMRC, HMRC will calculate whether there has been any underpaid tax for 2019-20 to 2022-23 or whether there has been any overpaid tax for 2015-16 to 2021-22.
What if I have overpaid the annual allowance tax charge?
If you have overpaid the annual allowance tax charge, a refund will be made either to you or to the NHS pension scheme.
If there is a decrease in the annual allowance tax charge between 6th April 2019 and 5th April 2023, HMRC will either refund you directly if you paid the charge or the scheme will need to contact HMRC to receive the refund. Any refund paid directly to you for this period will have repayment interest added to this by HMRC.
If there is a decrease in the annual allowance tax charge between 6th April 2015 and 5th April 2019, and you paid the charge, then the NHS pension scheme will contact you to issue a refund. If the NHS pension scheme paid the tax charge on your behalf, the NHS pension scheme will update your pension record to show the reduced tax charge paid and update your pension benefits.
What if I have a new or additional tax charge to pay?
If you have an additional or new annual allowance tax charge to pay for 2018-19 to 2022-23, this will be reported on the HMRC service and not on an amended Self-Assessment tax return.
HMRC will then send a notice to you by post detailing how much to pay and how to make this payment.
If there is any additional tax to pay, you can elect for the scheme to pay the tax charge for you. This must be done by 6th July 2025 and any additional tax due in this period must be reported to HMRC on the service by 31st January 2025. As the remediable pension savings statement may not be received until 5th October 2024, this does not leave much time to report any additional tax due to HMRC.
Here to help
If you have any questions on the McCloud Remedy and its tax consequences, our dedicated specialist team are here to help. To speak to our team on how we can assist, give us a call on 0151 348 8400.
