The NHS has made it clear that clinicians will not have to pay the annual allowance charge arising in 2019-20 and the overall impression is that there will be a nil cost. However, the recent Frequently Asked Questions issued by NHS England in respect of the temporary fix includes the following:
"Will I receive a benefit in kind tax charge as a result of this commitment?
The payment to compensate an employee for their Scheme Pays abatement at the time they retire would be treated as salary as it derives from the employee’s labour status, and will be liable to income tax at the prevailing marginal rate and national insurance at that point in time (as is the case for any regular pension payments). So the retiree will not be disadvantaged."
The first sentence states that there will be a tax liability but the final sentence suggests that the employee will not be disadvantaged! What do readers make of this? I can understand that the compensation would usually be taxable but on what basis would this be eliminated so as to ensure that the employee is not "disadvantaged"? Perhaps it will be deemed to be a further pension contribution in the year of retirement but this will not necessarily be deductible if the employee exceeds the annual allowance in that tax year.