Home > News > 2009 > January 2009 > Barnett Waddingham corresponds with HMRC regarding LTA freeze
Barnett Waddingham corresponds with HMRC regarding LTA freeze
The Government’s Pre-Budget Report on 24 November 2008 included an announcement that the Lifetime Allowance (“LTA”) would be frozen at £1.8m from 6 April 2010 for at least a further 5 tax years.
It had been widely anticipated that the LTA would increase in line with price inflation after 2010. Indeed, such an assumption will have been made in many cases where individuals were deciding whether or not to register for protection of qualifying benefits against the LTA. Such cases may need to be revisited and the deadline for registration, 5 April 2009, is fast approaching.
Barnett Waddingham LLP (“BW LLP”) has been in correspondence with the Pension Policy Team at HMRC to request an extension of the deadline for registration for at least a further year, making the following main points:
- The wide anticipation that the LTA would increase in line with price inflation;
- The need to review four years of advice in relation to registration for protection;
- The increased number of individuals likely to wish to apply within the remaining time;
BW LLP also expressed concern that individuals who might have decided not to register for enhanced protection, but would now wish to in light of the LTA freeze, may well have paid pension contributions since A-Day (6 April 2006), which now precludes them from registering for enhanced protection. BW LLP asked that such contributions should be permitted to be unwound.
Finally, BW LLP asked that HMRC commit to a method for increasing the LTA in future, to enable advisers to give more helpful advice to their clients and reduce the risk of having to review the advice in light of later changes.
The response from the Pension Policy Team of HMRC indicated that it had always been the intention for the LTA to be reviewed on a 5-yearly basis and that the announcement in the Pre-Budget Report was in keeping with this. They have DECLINED our request to extend the deadline for registration. They have also DECLINED the request to enable unwinding of any contributions since A-Day. They have also DECLINED to agree any method for increasing the LTA in future.
We have written to the Pension Policy Team of HMRC pointing out that in the Standing Committee Debate in June 2004, Ruth Kelly had indicated that the 5-yearly reviews would include consultation with outside bodies. We are not aware of any consultation with outside bodies prior to the announcement on 24 November 2008.
BW LLP will continue to provide up to date information on its website in relation to this and other matters which affect its clients. Should you wish to discuss this then please contact Bhargaw Buddhdev or your normal Barnett Waddingham consultant.
Date: 30 December 2008
Sources: Letter from Bhargaw Buddhdev to HMRC dated 1 December 2008
Response from HMRC dated 22 December 2008
Transcript of Standing Committee Debate on 17 June 2004