The Impacts of Remedy on Annual Allowance

The SPPA is required under HMRC legislation to provide Pension Savings Statements (PSS) by 6 October 2024 to individuals who: 

• Breach the Annual Allowance (AA) limit in a single scheme; or 
• Request an On Demand PSS before 6 July 2024 

In addition to these requirements, this year the SPPA must send a Remediable Pension Savings Statement (RPSS) to all active and deferred members to replace a previously received PSS for any tax year in the remedy period. 

If you are a self-employed GP, you will be sent a 2022/2023 PSS as this is the latest pension information held. 

If you are eligible for the 2015 Remedy 

Changes due to the 2015 Remedy will affect you if you meet all the following eligibility criteria: 

• joined a public service pension scheme on or before 31 March 2012 
• have pensionable service in a legacy scheme or the 2015 scheme during the remedy period (1 April 2015 to 31 March 2022); 
• were still a member of the scheme on or after 1 April 2015; or 
• left the service after 31 March 2012 but returned within five years. 

When you retire, you will need to make a decision about your pension benefits built up during the ‘remedy period’, this is the period between 1 April 2015 and 31 March 2022. Any CARE pension built up has been moved back to your legacy pension scheme. This means your pension growth must be calculated to correct your AA. 

Remediable Pensions Savings Statements 

The SPPA must recalculate the pension input periods for members impacted by the rollback of service in the remedy period and must send a Remediable Pension Savings Statement (RPSS) to members affected by pensions tax. This statement will set out amended pension input amounts for each of the tax years in the remedy period and any relevant carry-forward years. 

You’ll need to use the information in the RPSS with the HMRC Digital Service to correct your tax position. 

The HMRC Digital Service 

HMRC has introduced a digital service that enables members impacted by the 2015 Remedy to calculate any new or amended tax charges relating to the changes to their pensions tax position. 

When you receive a RPSS, you must use the HMRC digital service called ‘calculate your public service pension adjustment’ to correct your pensions tax position. This service will work out any repayments that may be due for any AA tax charge you may have paid or any new AA tax charges you may have to pay. You can access this service from the following link: Calculate your public service pension adjustment - GOV.UK (www.gov.uk) 

This service enables you to apply for a refund of AA tax charges (where applicable) for tax years from 2019-20 to 2021-2022 or apply for compensation for overpaid AA tax charges from the years 2015-16 to 2018-19. In addition, you will use this service to apply to pay an AA tax charge arising from the year 2022-2023. 

Before you use the HMRC digital service in full you should use the first part of the service to work out whether your tax position is affected. This should only take a few minutes to complete and may help avoid the need to use the HMRC Digital Service unnecessarily. 

We are sorry that SPPA administrators have no access to this service and cannot assist members to use this process so enquiries relating to this service must be directed to HMRC. 

Calculate any AA changes

Making a submission using the HMRC Digital Service means you will not be required to correct your self-assessment tax return for the years 2015-16 to 2021-2022. 

Instead, you should input the information required by the HMRC digital service including the recalculated pension input amounts (PIA) from your RPSS. In 2015/2016, the period over which AA was measured changed to align with the tax year rather than the scheme year, so the data for this year has been split accordingly. 

If you have other personal or private pensions in addition to your SPPA pension, you will need to include this information as well. Pension input amounts for additional pension arrangements must be supplied to you by the pension provider if you do not already have it. 

1. Determine if your tax position has changed 

Once you have completed your submission, HMRC will review the information you have provided against: 

• Your original self-assessment tax returns for the remedy years; 
• The Accounting for Tax (AFT) submissions the SPPA submitted to HMRC if we paid any of your tax charge; 
• Any direct tax charges you already paid for the remedy years 

Once the review is complete, HMRC will let you know what you need to do next. Remember, you do not need to amend a previously submitted HMRC self-assessment tax return for any of the remedy years. 

2. Tax years 2015/2016 to 2018/2019 (Out of scope years) 

The tax years from 2015-2016 to 2018-2019 are out of scope for HMRC tax corrections so HMRC cannot action any amendments to your tax position for these years. If there is a change to your AA tax charges for any of these years, HMRC will notify the SPPA and we will compensate you for any tax losses you may have suffered as a result of the adjustments to your pension input periods. Any increased AA tax charges for these years will not need to be paid to HMRC. 

3. Tax years 2019/2020 to 2022/2023 (In scope years) 

The tax years from 2019-20 to 2021-2022 are in scope for HMRC tax corrections so HMRC can action amendments to your tax position for these years. HMRC will refund overpaid AA tax charges and collect any new or additional AA tax charges that have been incurred in any of these years. 

Decrease in tax charge 

Where an AA tax charge in an in-scope year has decreased, HMRC will refund whoever originally paid the tax charge:

•  Where the original AA tax charge was paid directly to HMRC through self-assessment, you will receive the refund directly to the bank details provided with your submission. 
• Where the SPPA paid the AA tax charge via your pension scheme on your behalf (this is known as Scheme Pays), then HMRC will refund the scheme who will reduce the pension debit you received to offset the tax charge that was paid on your behalf. 

Increase in tax charge 

Where a new or additional AA tax charge is due, you will need to tell HMRC how you intend to pay the AA tax charge. You can choose to: 

• Pay HMRC directly, or 
• Use Scheme Pays to request that the pension scheme pays the AA tax charge on your behalf 

The deadline for you to pay the AA tax charge directly to HMRC is 31 January 2025.

The deadline for you to apply for payment of the AA tax charge through Scheme Pays arrangements is 6 July 2025 if you were an active or deferred member on 1 October 2023 or 6 July 2027 if you were a pensioner on 1 October 2023. 

Scheme Pays 

You can ask your pension scheme to pay a tax charge in return for a permanent reduction in your benefits at retirement. This is known as Scheme Pays. 

Scheme pays requests can be made through the HMRC Digital Service. When you indicate that you wish to pay a new or additional tax charge in this way, HMRC will tell the SPPA removing the need for you to apply scheme pays through the SPPA.

HMRC has extended the mandatory Scheme Pays deadline for 2022/2023 from 31 July 2024 to 6 July 2025. This deadline applies to any AA tax charge for tax years 2019/2020, 2020/2021 and 2021/2022 as a result of receiving a Remediable Service PSS. This deadline also applies to scheme pays requests for new AA tax charges incurred in the 2022-2023 and 2023-2024 tax years. For mandatory scheme pays elections made in these years your pension scheme is jointly and severally liable for the payment of the tax charge(s). 

Applications to use Scheme Pays made after the deadline will be treated as voluntary Scheme Pays. This means you will be solely liable for the AA tax charge and interest may be applied by HMRC for late payment. 

You can find out more information on mandatory and voluntary Scheme Pays here: https://pensions.gov.scot/pensions-taxation/annual-allowance/scheme-pays

4. Tax Year 2023/2024 onwards (only applicable where your pension growth exceeds £60,000.00) 

For the tax year 2023-2024 and for future tax years you must follow the standard HMRC reporting process. 

Changes to the Finance Act 2004, have now been introduced to allow for any negative growth in your Legacy scheme from 2023/2024 to be offset against any positive growth in your CARE scheme. 

You should use the HMRC calculator online at https://www.tax.service.gov.uk/paac to work out if you have an AA tax charge to pay for this tax year. 

You can read detailed guidance on how to complete the HMRC calculator using the information provided in your PSS on our website here: www.pensions.gov.scot/pensions-taxation/annual-allowance

Once you have used the calculator you will know the ‘amount on which tax is due’. The AA tax charge you will need to pay is dependent on your marginal tax rate. To calculate this, you should work out the rate of tax that would be charged if your excess pension savings were added to your taxable income. Further guidance about how to do this, and examples of the marginal tax rate can be found on the HMRC website: https://www.gov.uk/guidance/calculate-your-public-service-pension-adjustment 

Complete a HMRC self-assessment tax return

If you have a tax charge to pay, you are responsible for declaring this to HMRC by completing a self-assessment tax return. The Pension Scheme Tax Reference (PSTR) should be quoted on your self-assessment tax return and is available on your statement. Details about how to do this can be found on the HMRC website at https://www.gov.uk/topic/personal-tax/self-assessment

Pay the tax liability 

You can pay the tax charge to HMRC directly, or by electing for Scheme Pays. You must enter the tax charge on your self-assessment tax return, and if paying through Scheme Pays arrangements you must also complete a Scheme Pays election form. 

To elect for Scheme Pays you will need to submit a Scheme Pays election form. The form is available to download on the SPPA website https://pensions.gov.scot/pensions-taxation/annual-allowance/scheme-pays You should complete the form and email to SPPATax@gov.scot by the deadline.

Mandatory Scheme Pays is available for AA tax charges of over £2,000. The deadline for elections to be received by the SPPA for mandatory scheme pays is no later than 31 July following the January in which the charge must be declared on your self-assessment tax return. Mandatory Scheme Pays elections will not be accepted after this date unless you receive an amended statement, in which case the deadline is within three months of receiving the amended PSS (or the end of the period of six years from the end of the tax year to which the charge applies if earlier).

Voluntary Scheme Pays is available if you do not meet the conditions to make a mandatory scheme pays election but have a tax charge over £1,000. You can elect for Voluntary Scheme Pays any time up to 31 July in the year that follows the end of the period of six years from the end of the tax year to which the charge applies. Please note, to avoid interest charges the SPPA must receive your application by 1 December following the end of the tax year to which the charge applies. 

More information about mandatory and voluntary Scheme Pays is available here https://pensions.gov.scot/pensions-taxation/annual-allowance/scheme-pays

Scheme Pays after Retirement 

You can now submit a Scheme Pays election after you have retired, if your election is received before the relevant Scheme Pays deadline for the tax year in question. We encourage you to correct your tax position and apply for Scheme Pays as early as possible after you retire to minimise any pension overpayments that may result from your Scheme Pays debit being applied. The SPPA will implement the appropriate Scheme Pays debits upon confirmation of your finalised tax position from HMRC.