HMRC withdraws appeal in lifetime allowance fixed protection case
HMRC appears to have withdrawn an appeal in a case relating to loss of fixed protection due to the individual continuing to make pension contributions after failing to cancel several direct debits.
The HMRC case against Gary Hymanson related to Mr Hymanson’s mistake in failing to cancel a number of direct debits relating to his pension plans, leading to HMRC removing his entitlement to rely on fixed protection 2012 of £1.8 million.
The First Tier Tribunal found in favour of Mr Hymanson in November 2018 and recommended that HMRC reinstate Mr Hymanson’s fixed protection 2012. HMRC had been considering a challenge, however, according to the latest update from the Upper Tribunal (Tax and Chancery) hearings and register, HMRC’s planned action has been withdrawn.
The usual position with regard to pension contributions is that, apart from in very limited circumstances, pension contributions can only be ‘unwound’ where there is a genuine third party error such as described below in the Pensions Tax Manual:
‘Failure to stop an automatic payment from a bank and building society
If the member has told their bank or building society in good time that they want to stop the payment but the bank or building society have failed to act on this then the member will not lose their fixed protection.
Here, the payment(s) made by the bank or building society were beyond their control and the member never intended that the payment(s) should be contributions. HMRC will not consider such payments as contributions and so fixed protection will not be lost.
The payments should be returned to the member although they will have to repay any tax relief they have received in relation to them.’
The fact that HMRC appears to have decided not to pursue further action in this case may provide a glimmer of hope for anyone in a similar position.
Clearly it is vitally important that the appropriate steps are taken to ensure that no further pension funding takes place after the fixed protection date if the member wishes to ensure their fixed protection isn’t lost (and which could potentially result in lifetime allowance tax charges of many thousands of pounds being incurred). However where a genuine third party mistake has been made, or, as in this case, where the member can demonstrate that they have made a genuine mistake, this case shows that it can be worth pursuing the matter with HMRC.