Three new sets of regulations were laid on 17 December, making minor changes to the FA 2004 pensions tax regime. These new regs are likely to be uncontroversial and indeed generally welcome.

1. The Registered Pension Schemes (Authorised Member Payment) Regulations 2007 (SI 2007/3532) enable payments made to with-profit policyholders as part of a reattribution exercise (in which a company transfers the inherited estates from its with-profits fund to its non-profits fund), in exchange for policyholders giving up their rights and interests over the inherited estate, to be treated as authorised member payments. This preserves the pre-A Day situation where such payments were not chargeable to income tax. The underlying rationale, according to the accompanying Explanatory Memorandum, is that

"Where such a payment does not diminish the value of the fund held within the pension scheme, and is made to protect policyholders' interests, and then these payments should not be subject to the unauthorised payment tax charge." (para 7.5)

HMRC consulted on this subject last July. The regs come into force on 7 January 2008.

2. The Registered Pension Schemes (Meaning of Pension Commencement Lump Sum) (Amendment) Regulations 2007 (SI 2007/3533) are needed because of the changes to the definition of a pension commencement lump sum (PCLS) in Sch 29 FA 2004 made by para 11 of Sch 20 FA 2007, regarding the timing of payment.

These regs amend SI 2006/135 which overrides, in certain circumstances, the rules that must be satisfied for a lump sum to qualify as a PCLS. If a lump sum payment is not a PCLS or treated as such, it may be subject to a tax charge on the basis that it is an unauthorised payment. SI 2006/135 has the effect of treating a repayment of overpaid tax in respect of the lifetime allowance charge (which is refunded by HMRC to the pension scheme) as a PCLS and so not subject to a tax charge as an unauthorised payment. These Regulations ensure that following the FA 2007 changes, the repayment continues to qualify as a PCLS. In line with FA 2007, they also extend the previous 3 month limit for payment of a lump sum arising out of a refund of overpaid LTA charge to 12 months (from the date of receipt of the refund)

The regulations come into force also on 7 January 2008.

Both this and the previous SI are interesting because they illustrate the diverse circumstances in which additional legislation is required to ensure certain payments are not treated as unauthorised payments under the new regime. HMRC is understood to be reviewing the impact of this regime, which makes anything that is not prescribed as an authorised payment an unauthorised payment, with all the unwelcome tax consequences that flow from that. It is increasingly apparent that at least until recently, HMRC appreciated neither the range of circumstances in which a payment which was unexceptionable pre-A Day is now unauthorised, nor the sheer volume of unauthorised payments unavoidably being generated now.

3. The Employer-Financed Benefits (Excluded Benefits for Tax Purposes) Regulations 2007 (SI 2007/3537) address another unintended problem created by FA 2004, viz. that certain benefits are exempt from tax for employees, but if the employer continues to provide them after the individual has retired or died, they become liable to tax (unless worth less than £100 pa).

HMRC consulted last March on a draft of these regulations (see Aries article). They ensure that certain minor non-cash benefits provided by former employers for retired former employees will be excluded from taxation and reporting as relevant benefits under an employer-financed retirement benefit scheme (EFRBS). The list of "excluded benefits" includes continued provision of accommodation and related removal expenses, equipment for disabled former employees, welfare counselling, recreational benefits, annual parties and similar functions (subject to a maximum cost of £150 per head (ITEPA 2003 s.264, as amended by SI 2003/1361)) and will-writing costing up to £150. The regulations come into force on 8 January 2008, but in effect are backdated to 6 April 2006.