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Summer of consultation

4 weeks ago

July felt like an incredibly busy month. Aside from the continued juggle of home-schooling alongside the day job, consultations have been coming at us thick and fast. It seems every Government body wants in on the act and has given us something to think about – many of these with relatively short deadlines in late August or early September. I can see the attraction of putting it out there before you go on summer break and having the responses in when everyone’s back in September. Not so convenient from the other side, though!

So what have we got? In the pensions world, the biggest one is the Treasury’s ‘Pensions tax relief administration: call for evidence’. This is the overdue look at the net pay issue as promised in the Government’s election manifesto. Thankfully the paper puts aside any suggestion of wider changes to the pension tax system – “This call for evidence […] does not cover the marginal rate relief structure of pensions tax relief, nor does it cover issues around the limits on pensions tax relief.” What it does do is put forward four main approaches for dealing with the problem, namely:

1. paying a bonus based on real-time data;

2. a standalone charge on RAS schemes;

3. employers operating multiple schemes; or

4. mandating the use of RAS for defined contribution schemes.

Option 1 feels in many ways like the best solution but, as the most expensive to implement, may not progress. Option 2 is an interesting way of dealing with inequality for those worst off – removing the benefit for low-earners currently in RAS schemes. It would also have implications for Junior SIPPs. Thankfully this approach looks least likely to proceed. Options 3 and 4 would require the most work for employers and option 4 will receive a lot of objections, not least from net pay scheme providers.

The biggest changes out of any of the consultations, in the short term at least, are likely to come about in respect of Capital Gains Tax (CGT). The Office for Tax Simplification (OTS) has released a CGT review and call for evidence. The OTS doesn’t get to change the rules, and its influence can be varied, but this review has come from a direct request from the Chancellor and it is widely expected to have an impact on decisions made in the Budget. The first deadline on general principles has already passed (10 August), but the full response deadline is 12 October. Pensions are unlikely to be directly impacted, but changes to rates and allowances may make tax wrappers even more attractive. Suggestions have been made of aligning CGT rates to those of Income Tax, and merging the allowance with the personal allowance, dividend allowance, and even potentially the ISA allowance. Definitely one to watch.

On top of all that, we have the wider Treasury Committee call for evidence on ‘Tax after coronavirus’ – a big picture piece looking at the whole system, including the balance between taxation of work, savings/pensions and wealth.

Other consultations to note are HMRC’s look at modernising the Stamp Taxes on Shares Framework and DWP’s look at the charge cap in auto enrolment schemes.

I don’t know about you, but I might need a holiday too.

This article was previously published by Money Marketing

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Lisa Webster
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Lisa Webster

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Senior Technical Consultant

Lisa is an Economics graduate who has been in the financial services industry since 2003. Prior to joining AJ Bell in 2014 she spent nine years working in senior technical and consultancy roles at a major SIPP and SSAS provider. Lisa is part of our Technical Team, responsible for providing regulatory and technical analysis to the business and outside world. She is also a regular speaker at adviser events.

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