Public Sector Pensions

There have recently been significant developments in HMRC’s approach to the taxation of pensions in the Public Sector Emergency Services such as the Fire Service, Police Forces, NHS etc.

Protected Pension Age – Re-employment After Retirement

Any employee retiring after 5 April 2010 with a protected pension age can become liable to an ‘unauthorised payment’ tax charge of up to 55% if they are re-engaged by the same employer without a suitable break in employment.

Having inadvertently fallen foul of this rule, many Public Sector Authorities are electing to pay the tax arrears on their employees’ behalf.

We have been able to negotiate significant settlement concessions with HMRC in these circumstances and these could be applied to your Authority if you have the same problem.

Protected Pension Age – Multiple Employments

HMRC currently says that the ‘unauthorised payment’ charge also applies to employees who, having two or more employments with the same employer, take protected pension age retirement benefits from one job whilst remaining employed in the other(s).

We are challenging HMRC on this view but if they are successful the sector will face further substantial tax liabilities requiring similar settlement negotiations.

Ill-Health Pensions

Ill-health pensions are generally exempt from income tax if the disablement was suffered in the performance of the duties and the employee leaves with less than 2 years’ service.

Some employers have been incorrectly ignoring the 2 years’ service rule and applying the tax exemption to all ill-health pensions. Again, we are negotiating favourable settlement terms with HMRC on behalf of our clients.

HMRC Targeting Activity

As a result of these issues HMRC is now focusing its attention on all of the UK’s Fire Services, issuing formal requests for disclosures.

We at Elysian are leading experts in Public Sector Emergency Services employment tax compliance. Our experience in negotiating settlements with HMRC on these issues could help you to significantly minimise any unexpected tax liabilities.

For further information on how we could help you manage the above risks please contact one of our employment tax specialists, Robin Woodhouse (07702 544096) and Robert Ennis (07764 245395).

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