In Dr J Gibson (deceased) vs HMRC [2020] TC07916, the First Tier Tribunal (FTT) allowed the taxpayer’s late claim for pension enhanced protection finding the taxpayer had a reasonable excuse and had notified HMRC of the claim without unreasonable delay.
- Dr Gibson had pension savings of £2,120,000.
- He appointed a regulated and qualified financial adviser to provide him with pensions advice.
- The financial adviser incorrectly concluded that Dr Gibson had not exceeded the Lifetime Allowance (LTA) for pension purposes ignoring the effect of pensions already in payment. The issue of enhanced protection was not raised with Dr Gibson.
- The error was identified in late 2015. The adviser recommended to Dr Gibson, on 2 December 2016, to engage a specialist to make an application for retrospective protection.
- This retrospective application was submitted to HMRC on 6 February 2017.
- HMRC denied retrospective protection. Dr Gibson appealed to the FTT.
Where an individual has pension savings valued in excess of the LTA, the excess funds are subject to tax charges when pension benefits are crystallised.
- The LTA was introduced on 6 April 2006 at £1,500,000. At this time, taxpayers could protect against LTA charges by claiming primary protection or enhanced protection.
- The deadline to claim protection was 6 April 2009, with late claims permitted where the taxpayer:
- Had a Reasonable excuse for not giving notification to HMRC on or before 6 April 2009, and
- Gave a notification to HMRC without unreasonable delay after the reasonable excuse ceased.
The FTT allowed Dr Gibson’s appeal, finding that:
- As Dr Gibson had 'no more knowledge of pension tax law than the next man' it was reasonable for him to rely on a qualified adviser. This amounted to a reasonable excuse.
- Dr Gibson‘s reliance on his adviser amounted to a reasonable excuse, that reliance ended on 2 December 2016 when he was advised that he needed a specialist to make an application for retrospective protection.
- There was a delay of nine weeks between the reasonable excuse ending and HMRC being notified of the claim: this delay was reasonable having regard to Dr Gibson’s need for a professional adviser and the work required to prepare the claim.
Useful guides on this topic
Pensions: tax rules and planning
This guide provides a summary of the tax rules and planning opportunities surrounding pensions.
Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal?
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