Published by Chris Ramsey on
The 2014/15 levy framework was part of the First Triennium of the New Levy Framework, introduced back in 2011, and one that many trustees and employers had just about got to grips with. Levy year 2012/13 saw the introduction of the guarantor strength requirements for the first time. At the same time the PPF began its first round of adequacy testing. A fall in recertifications for 2013/14 led the PPF to increase their levy collections by £17 million, with expected contingent asset rejections in 2013/14 leading to a further increase in levy collections amounting to £8 million.
With no substantive change in the Rules or Guidance between levy years 2013/14 and 2014/15, the PPF acknowledged an expectation in their 2014/15 Consultation Document that, by the 2014/15 levy year, “schemes will have been deterred from certifying guarantees at a level where the guarantor’s ability to pay would be in doubt”.
Therefore, with many schemes’ trustees deeming their “tried and tested” 2013/14 approach to remain reasonable for the 2014/15 recertification process, there will no doubt have been some surprises when certifications of parent and group company guarantees that were previously assumed to be fit for purpose were subsequently rejected in full by the PPF.
Over the last couple of months, Barnett Waddingham has been appointed to assist several clients in appealing their 2014/15 PPF levy invoices. In each case, valuable contingent assets had been disregarded by the PPF for levy calculation purposes.
One of the most notable cases to have reached a conclusion by the time of writing was a successful appeal against a rejected contingent asset that saw one client’s levy fall from £170,000 to £20,000. In this case, we were able to work with the client and the client’s legal and covenant advisers to provide the PPF with sufficient clear and in-depth detail of the client’s intra-company relationships and available assets to overturn the initial decision to reject the contingent asset.
On a separate case, receiving the “wonderful news” of their successful levy appeal, Steve Mann, Finance Director at Electrosonic Limited, acknowledged that Barnett Waddingham’s advice “represents real value to Electrosonic”.
While every appeal has been unique, there have been a number of common threads and underlying principles that have underpinned each case. Based on a clear understanding of the appeals process and the PPF’s own Guidelines, we have been able to help our clients appeal levies and generate significant savings for the 2014/15 levy year, as well as setting a useful framework for future years’ recertifications.
With the PPF‘s deadline for contingent asset re-certifications for the levy year 2015/16 fast approaching, employers and trustees will be more eager than ever to ensure that certifications are suitably robust and likely to pass muster if challenged by the PPF again later this year. We would encourage all employers looking to recertify any type of contingent asset to carefully consider the PPF’s Guidance with their advisers and address the requirements in a robust but proportionate manner.