In Martin Laker v HMRC [2024] TC09224, the First Tier Tribunal (FTT) found that for pensions Fixed Protection 2012 purposes, a ‘year’ was not 12 consecutive months.
Dr Laker obtained a Fixed Protection 2012 (FP 2012) certificate for Pension lifetime allowance purposes on 30 January 2012 and he:
- Opted out of the NHS pension scheme with effect from 1 February 2013.
- Rejoined the scheme with effect from 1 March 2013.
- Opted out for the final time on 15 August 2013, with effect from 1 September 2013
A precondition of relying on FP 2012 protection is that the pension saver must have ceased to make any pension contributions and must not have any benefit accrual on or after 6 April 2012, subject to ignoring increases below a defined percentage threshold.
- Dr Laker’s pensionable pay increased with effect from 1 April 2013.
- HMRC asserted that this was an increase in Dr Laker’s final year’s pensionable pay which exceeded the relevant percentage threshold, resulting in a loss of FP 2012.
- Dr Laker Appealed to the First Tier Tribunal (FTT).
Whether Dr Laker’s increased pension entitlements exceeded the relevant threshold turned on the meaning of ‘year’ in the statutory words “the member’s last year of pensionable employment”.
- Dr Laker argued that ‘year’ meant 12 consecutive months.
- Here, Dr Laker’s last full year of pensionable employment ended on 31 January 2013.
- Using this interpretation, the increase to Dr Laker’s pension entitlement after 5 April 2012 would not have exceeded the relevant threshold.
- HMRC argued that ‘year’ meant any combination of days, weeks or months that added up, in aggregate, to the equivalent of 12 months or 365 days.
- Under this approach, Dr Laker’s last year of pensionable employment was the period between 4 August 2012 to 31 August 2013.
- If this definition of ‘year’ applied, Dr Laker’s increased pension entitlement on 1 April 2013 exceeded the relevant threshold, and FP 2012 would be lost.
The FTT found that:
- To define ‘year’ as meaning 12 consecutive months was compelling, however, in the context of the legislation the word ‘year’ must mean a combination of periods totalling 12 months.
- HMRC were correct to revoke Dr Larker’s FP 2012 certificate.
The appeal was dismissed.
Useful guides on this topic
Pensions: Tax rules and planning
What tax rules apply to pensions? What tax relief is available? What tax charges can arise? What planning opportunities are there?
Pensions: Tax charge for excess contributions
When does a tax charge arise for excess pension contributions? What are taxpayers' responsibilities under Self Assessment?
Pensions: Unauthorised payment charges
What is a pension unauthorised payment? When does a tax charge arise? Who pays the charge?
Employer pension contributions
Is there a taxable employment benefit if an employer makes contributions to an employee's pension scheme? What are the rules for employer pension contributions?
NHS Pensions: Scheme pays elections
What is an NHS scheme pays election? What is the deadline? What if complete information is not available by the election deadline? Can elections be amended?
External link
