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When did he decide?

When did he decide?

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A taxpayer takes early retirement and stands to receive a lump sum from his opension scheme of about £63000. He has a secondary employment, which after 31/12/13 became his only employment. He wants to know whether, should he decide to pay £30000 into the secondary employment's pension scheme (actually a self-employed scheme). Will it be taxed? 

As I read HMRC's website, the recycled lump sum is only taxable if you decide to recycle it before you receive it. You have to decide in advance of receiving it. This is what RPSM04104930 of their MAnual says. It also says the onus is on HMRC to prove that pre-planning took place.

This sounds too good to be true. The key word seems to be "decides". Since most tax law turns on the meaning of words, is there anywhere the point has been discussed?

Did he decide when I told him it was a good idea and he thought it would but what about recycling-(he is quite clued up)?  Or when he appled for of the main employer's scheme pension and elected to receive a lump sum. Or did he decide when he selected a scheme and calculated the amount to pay into it?  Or when he asked his IFO to select a fund to pay in.

Nichola Ross Martin commented on this in 2009 but did not elaborate .  Is this one of those bits of legislation we read about and it doesn't get applied?

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By Ken of Chester le Street
25th Jan 2014 12:13

I've read a bit further:

Always better to go to the source. What on earth does envisage mean? According to the Concise Oxford Dictionary it means: " regard of or conceive of as a possibility.Form a mental picture of..."

Not the most helpful bit of drafting. It is far too wide. Anyone coming up to retirement is capable of envisaging recycling. I would still like to know whether your correspondents has a=encountered a challenge by HMRC on this one?

i susoect financial advisors are over-cautious on this, since it is clear that there is nothing to stop anyone from recycling their lump sum provided they don't ionvest more than 30% of it, and it doesn't exceed their annual allowance or earnedincome. Or have I missed something?


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