Lost Your Lifetime Allowance Protection? You may be able to get it back
For the first time a challenge to HMRC’s hard line approach to loss of lifetime allowance protection following a mistake has had some success. In the recent case of Hymanson v HMRC in the First-Tier Tax Tribunal, HMRC were directed to issue a new certificate of fixed protection to the taxpayer.
In 2011/2012 Mr Hymanson was advised by his actuary to apply for fixed protection in relation to his pension savings lifetime allowance. He subsequently received a letter from his actuary confirming the certificate had been obtained, giving him a lifetime allowance of £1.8 million after 5 April 2012, and that he could not make any further contributions to any of his four pension arrangements. The Finance Act 2011 provided that fixed protection ceased to apply if there was benefit accrual for any individual under a registered pension scheme i.e. if a contribution is paid.
Following a cancer diagnosis which prompted Mr Hymanson to get his affairs in order in 2015, he noticed that the standing orders to his pension arrangements had been continued in error. He sought HMRC’s agreement for the contributions to be refunded on that basis. HMRC’s initial position was that the only mistake they would accept was if the individual had told the bank to stop making payments but the bank had failed to act. As this was not the case, HMRC’s position was the certificate of fixed protection was therefore lost.
The First-Tier Tribunal pointed out HMRC had failed to consider any possibility that the contracts, under which the individual continued to make payments to the relevant pension schemes, might be void as a result of a mistake. Equally, the Tribunal pointed out that where a taxpayer would be entitled to rescission if he were to take his case to the High Court, a Tribunal should make a determination as if that remedy had been granted. While it accepted the Tribunal itself did not have power to order rectification, it took the view it may determine that if rectification would be granted by a Court, which does have jurisdiction to grant it, the taxpayers’ position will follow as if such rectification had been granted. This was the basis upon which HMRC was directed to issue a new certificate to the taxpayer.
Over the last seven years Fixed Protection has become one of a range of different protections offered by HMRC, and over this time period a number of individuals have lost them due to genuine mistakes, such as being auto-enrolled, or re-enrolled, without being aware a contribution was going to be deducted (only discovering that this was the case a couple of months later).
The above case seems to finally provide some opportunities to those individuals caught in this type of situation to rectify matters. As always it will depend upon the specific details of each case. If you have lost your lifetime allowance and would like to talk to someone about re-opening an approach to HMRC in light of the new case please contact: Kim Jones or Simon Ellis.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
‘Doing the right thing’ is at the heart of Freeths. Find out more about our excellent client service and the strong set of values that guide the way we work.
Talk to us
Freeths are a leading national law firm with 13 offices across the UK. If you have a query about our services or just want to find out more, why not give us a call?
Contact: 03301 001 014