Lost pension form leads to £1m tax billby
Bungles by advisers, the pension provider, and the taxpayer’s lawyer led to an application for pension protection being missed and not corrected for seven years.
Donald Ketley thought that his advisers had applied for his pension protection by 5 April 2009, but it turned out they had not. By the time he found out, he was only eligible for a reduced form of protection, which would cost him an estimated £1m of additional tax.
His late application for full protection in December 2016, asserting that he had a reasonable excuse for missing the 2009 deadline, was rejected by HMRC, and the first-tier tribunal (TC07647) rejected his appeal.
He was granted limited leave to appeal to the Upper Tribunal (UT/2020/000351).
When the pension legislation changed on 6 April 2006 (A-Day), new lifetime allowance charges were introduced to take effect when pension rights valued in excess of £1.5m were crystallised. FA 2004 Sch 36 offered primary and enhanced protections which would exempt taxpayers from these charges provided the protections were claimed no later than 5 April 2009.
Where did the form go?
Ketley qualified to apply for these protections, as at A-Day, his pension rights were worth £5.2m, and had since grown to around £8m. Ketley asked his adviser to send the appropriate form (APSS200) to HMRC. The adviser had completed the APSS200 in 2006 and passed it to AEGON (the pension provider) to insert valuations and send on to HMRC.
HMRC did not issue a certificate confirming the protections – something it was obligated to do upon receiving a valid APSS200 – but this omission raised no red flags with either Ketley or his advisers at the time.
In 2015, a newly-appointed adviser wrote to HMRC querying why no certificate had been issued, and was told no form APSS200 had been received. Somewhere in the pipeline the form had vanished.
In January 2016 Ketley contacted a lawyer (Abrol) and instructed him to investigate what had happened and advise on the prospects of bringing a professional negligence claim. Abrol was not instructed to consider how to remedy the position with HMRC.
At this point Ketley still did not know that he could submit a late notification.
In April 2016, Abrol became aware of the possibility of a late notification. In August 2016 Abrol wrote to HMRC requesting the discretionary acceptance of a late application (he sent the actual form APSS200 on 1 December 2016).
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