Andrew Hubbard, CIOT President, said: “The CIOT highlighted the unfairness in the original proposals, which favoured those who paid, or whose employer paid, regular monthly or quarterly pension contributions, while disadvantaging those who made less regular contributions.”
The self-employed typically make annual contributions only once their income for the year has been determined.
The CIOT also welcomes the current constructive dialogue with the Government on regulations to permit some taxpayers who switch scheme providers to continue to obtain relief. The Finance Bill provisions limit relief for those higher paid earners who change their scheme provider, even where that is for financial rather than tax reasons.
Andrew Hubbard added: “We welcome the fact that the Government has listened to our concerns. We had hoped that the changes would have gone further, but we can appreciate that the current adverse financial conditions have necessitated some tough decisions.”
The CIOT looks forward to examining the detail of the changes and hopes that there may be opportunities for further changes if the rules do not work as intended.
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For press information contact Simon Goldie on 020 7340 0569 (direct line), 07879 497316 (mobile). Email sgoldie@ciot.org.uk
Notes for editors
Higher rate tax relief for pension contributions is to be tapered away or withdrawn for taxpayers earning over £150,000 with effect from April 2011. The Government is introducing anti-forestalling rules to prevent such taxpayers from accelerating their contributions so as to gain extra relief in the intervening period.
The complex anti-forestalling rules are set out in Finance Bill 2009 Schedule 35. These aim to permit higher rate relief, for taxpayers earning over £150,000, until April 2011 only on payments made which do not exceed a ‘protected pension input amount’ (PPIA). A PPIA was due to be based on contributions paid under existing pension arrangements, where the contributions are paid quarterly or more frequently. Where contributions were paid less frequently relief was due to be capped at £20,000.
The new amendments propose that the PPIA can be based on the average of irregular contributions paid in the three years to 5 April 2009, and is to be capped at £30,000, or earnings for the year, if lower. Contributions have to be paid less frequently than quarterly to count as irregular.
Following a widespread review of pension provision, significant reforms to pension schemes and contributions were introduced on ‘A’-Day, 6 April 2006. The rules, which were expected to last a lifetime, included:
