Round Up Autumn 2018

technical matters 5 Introduced on 6 April 2015, then reduced from £10,000 to £4,000 from 6 April 2017, the money purchase annual allowance (MPAA) continues to cause headaches. Our helpdesk receives lots of questions about the MPAA and what can trigger it. Here’s a quick reminder. The following trigger the MPAA (either from a UK registered pension plan or from an overseas scheme that has had UK tax relief): -- Taking income from a flexi-access drawdown (FAD) plan (includes short term annuity purchase). -- Taking an uncrystallised funds pension lump sum (UFPLS). -- Converting capped drawdown to FAD and then drawing some income. -- Taking more than 150% GAD from a capped drawdown plan. -- Receiving a stand-alone lump sum when entitled to primary protection and TFC protection is more than £375k. -- Receiving a payment from a flexible lifetime annuity (one where payments can decrease). -- Receiving a scheme pension from a DC arrangement where it’s being paid directly from those DC funds to less than 11 other members. In addition, anyone in flexible drawdown before 6 April 2015 is subject to the MPAA from this date, irrespective of whether they’ve taken an income withdrawal before then. What triggers the money purchase annual allowance? Events that won’t trigger MPAA -- Taking only the tax free cash and placing the balance in FAD (until such time as any income is withdrawn). -- Taking a trivial commutation or small pots lump sum. -- Receiving a scheme pension from a DB scheme (for example pensions from final salary schemes). -- Receiving payments from a conventional lifetime annuity(that can’t decrease other than in permitted circumstances). -- Taking no more than 150% GAD from a capped drawdown plan. -- Receiving a scheme pension paid directly from the funds of a DC pension where at least 11 other members are in receipt of a scheme pension. -- Receiving a scheme pension secured by way of an annuity (regardless of the number of other members in receipt). These triggers relate to a member, and their own funds, and don’t apply where benefits are being paid to a dependant/beneficiary (for example where a beneficiary receives a FAD income payment from a dependant’s/ nominee’s/successor’s FAD arrangement, this isn’t a trigger). Rent a room relief reform Rent a room relief allows individuals to earn up to £7,500 tax free from letting out furnished accommodation in their main or only residence. Key conclusions from the government’s recent call for evidence are that: -- The government will retain rent a room relief at its current level of £7,500 for the time being. -- The purpose of rent a room relief is to support those with spare rooms to take in lodgers. The letting of whole properties is a different type of activity that should fall outside the scope of rent a room relief. As the rules are currently unclear on this point, the government plans to introduce a new shared occupancy test which requires the taxpayer to be living in the residence and physically present for at least some part of the letting period.