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GPs set to miss out on ‘thousands of pounds’ in pension tax charge compensation

GPs set to miss out on ‘thousands of pounds’ in pension tax charge compensation

GPs could miss out on compensation worth ‘thousands of pounds’ for pension tax charges because they are not yet able to make a claim, GP accountants have warned.

GPs in England were given a deadline of 11 February to claim compensation against the pension annual allowance tax charge for 2019/20.

Under the special arrangement, members of the NHS pension scheme can elect for the scheme to pay the tax charge on their behalf and are then compensated for the effect of the deduction on their pension income when they retire. 

GPs are required to submit a ‘scheme pays’ election to NHS Pensions before they can submit a claim for the compensation to Primary Care Support England (PCSE) by the deadline next week.

But the Association of Independent Specialist Medical Accountants (AISMA) has called for the deadline to be extended, warning that ‘many GPs have not received the information they need to make a claim’.

It today said that many are ‘yet to receive’ a pension savings statement for the year from NHS Pensions – needed before they can make a claim – and that many pension records have not been updated.

AISMA vice-chairman and partner at RSM UK Tax and Accounting James Gransby said: ‘GPs are unable to make an accurate claim for compensation if they don’t have information they need about the growth of their pension benefits. 

‘Through no fault of their own many GPs are at risk of losing compensation which could be worth thousands of pounds across the years of their retirement.’

Andrew Pow, AISMA board member and healthcare partner at Mazars, added that GPs ‘should be allowed a dispensation so that they can submit a claim at the point they have received information from NHS Pensions about their annual allowance charge for 2019/20’.

He advised that any GPs who think they may be ‘at risk of a charge’ should talk to their accountants ‘now’ and ‘consider making an estimated claim’.

PCSE guidance on the compensation scheme stressed that ‘the third GP application window will close on the 11 February 2022’. 

‘This will be the final application window for GPs to submit their Pensions Annual Allowance Compensation Scheme application forms to PCSE for processing ahead of the scheme deadline on 31 March 2022’, it added.

GP pensions experts previously warned about the issue in June, saying that many GPs could miss out on reclaiming their pension tax charges for 2019/20 and some individuals could miss out on ‘thousands or potentially tens of thousands of pounds’.

In July, HMRC announced it was extending the reporting and payment deadlines for ‘scheme pays’ arrangements – however, this did not affect the deadline for claiming compensation for 2019/20 tax charges.

What is the annual allowance compensation scheme?

Under the current NHS pension scheme, the highest-earning GPs pay at least 14.5% in contributions, but a tapered annual allowance limits the amount of money that can go into the pension pot each year without facing significant tax penalties. 

The pensions taxation rules, in particular around annual and lifetime allowances, push GPs to reduce their hours or retire early to avoid large tax bills.

But for the 2019/20 tax year, GPs facing a tax charge over the pension savings annual allowance threshold can have this charge paid by the NHS pension scheme by filling in and returning a scheme pays election and a compensation form

To access the compensation, GPs will use the ‘scheme pays’ arrangement already available to NHS pension scheme members, which usually allows tax charges to be deferred until retirement.

The Government made the compensation available in 2019 in order to allow clinicians to take on more shifts or sessions without worrying about an annual allowance charge on their pensions.

The DHSC is currently responding to a consultation on changes that could see GPs pay less in pension contributions from April.

The Government has previously committed to resolving NHS pensions issues, but in February rejected calls to reform GP pensions taxation, arguing the problem had already been addressed.

It comes as the primary care minister last month said that the Department of Health and Social Care (DHSC) will meet with the Treasury to ‘look at’ GP pension concerns.

Meanwhile, the pensions ombudsman ruled in October against PCSE and the NHS Business Services Authority (NHS BSA), saying they ‘negligently’ handled a doctor’s pension contributions

And Pulse revealed last year that NHS England has paid out thousands of pounds in compensation to GPs for mishandling their pensions but has banned them from talking about it.

The BMA has repeatedly called for the Government to reform pension taxation to avoid doctors facing large tax bills.


          

READERS' COMMENTS [1]

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Douglas Callow 3 February, 2022 8:13 pm

accountants assured me an estimate is fine as long as you have a scheme pays election in place