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How to declare repayment of overpaid pension

Client has been overpaid Teachers Pension and is repaying this. How is this declared on Tax Return

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My client has been overpaid Teachers Pension and is repaying the overpayment to TP.

On the basis that the client will have been taxed on the pension income he received, it seems equitable that he should receive tax relief for the repayments.

My question is how / where is the repayment declared on Tax Return?

Many thanks for your help.

Replies (11)

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By paul.benny
21st Jan 2022 11:01

How is repayment being made - direct to TP or by deduction from future pension payments?

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Replying to paul.benny:
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By stephenpotter
21st Jan 2022 14:49

Hi, it is by direct payment to TP. There is no ongoing receipt of pension.

Many thanks

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Replying to stephenpotter:
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By paul.benny
21st Jan 2022 17:22

stephenpotter wrote:
There is no ongoing receipt of pension

Odd. Why no continuing payment?
I can understand that the fund may have calculated an incorrect amount. But to have paid when person was apparently not entitled to a pension merits a bit more digging.

Should Client be repaying net or gross? Depending on the reasons for the overpayment, I think Client should (re)submit tax returns for the affected years and get a repayment of the tax paid. And only repay TPF the net in the meantime.

Client shouldn't be correcting a prior error by a current year error.

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Replying to paul.benny:
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By Catherine Newman
21st Jan 2022 17:26

Client taken their whole pot in one go?

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By Catherine Newman
21st Jan 2022 16:27

An amended return to show the lesser amount?

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By Hugo Fair
21st Jan 2022 19:44

There's too much missing here to say anything useful.

From the later comment of "There is no ongoing receipt of pension" we have to assume that there never was any entitlement to all the pension payments - which is strange because TP are not free 'n' easy with money!

In no particular order:
* In which tax year(s) were the overpayments made?
* Did they have tax deducted at source (by TP)?
* Has client already included these payments (and any tax) in a SATR?
* Is client still in Employment?
* If so, is client currently making contributions to TP?
* If not, is client a member of the scheme from past contributions?
* Were the pension payments being made as 'retirement income' or were they some other form of withdrawal?
* Were they made from the client's TP 'account' or did they come from someone else's account (and if so at whose instigation)?

I suppose a shorter overall question is ... whose fault is the 'wrong payment' and who agreed the method of repayment? That might lead you back to some of the above Qs.

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Replying to Hugo Fair:
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By paul.benny
21st Jan 2022 21:45

We're on the same page here. Too much missing information to give a meaningful answer.

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Replying to Hugo Fair:
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By stephenpotter
22nd Jan 2022 09:47

Just for some background, this is the first year that we have acted for this client. He advised me that he doesn't receive any income from Teacher's Pension.
He advised that he is paying back overpayments made by TP after he remarried, and rules were altered for lifetime benefit payable to widowers of teachers.

Does that help to clarify my question at all?

Many thanks

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Replying to stephenpotter:
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By Tax Dragon
22nd Jan 2022 13:02

A few thoughts (this is off the top of my head, so take with salt... and, yes, call me a hypocrite):

The payments were (probably) not lawfully made, so returning them should, logically (and as you say), put the taxpayer (and the pension fund) back to the (tax) position they would have been in had the payments not been made.

That means that any adjustment (and presumably any recovery of tax by the pension fund) is, as Catherine said, for an earlier year. None of this will go near the tax return(s) you are preparing/will prepare for current year(s).

You weren't responsible for the earlier years. Make sure any work you do is covered by your terms of engagement. It might not be your responsibility to sort.

Oh and... is there actually any tax loss/under-/over-payment, from your client's point of view? If tax at source matched excess tax arising as a result of including the (probably) unlawful payment(s) on tax returns, do you need to worry? (Pension fund obviously does, but that's not your concern.)

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Replying to stephenpotter:
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By Hugo Fair
22nd Jan 2022 15:32

Yes ... and therefore, as TD puts it, "any adjustment .. is, as Catherine (and indeed Paul) said, for an earlier year. None of this will go near the tax return(s) you are preparing/will prepare for current year(s)" - which seems to answer your only question.

Everything else only matters to whoever picks up the job of filing amendments for earlier years ... and, even then, only if their remit covers unpicking the whys and wherefores of the case - rather than 'simply' recalculating amended income/Tax.

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Replying to Hugo Fair:
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By Tax Dragon
22nd Jan 2022 15:54

And indeed Paul. Sorry, Paul.

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