HMRC has launched an ‘improved’ digital service that can help NHS pension members affected by the McCloud remedy to claim tax rebates potentially worth thousands of pounds.
The online tool, paused in April due to ‘a technical issue’ but now live again, will also determine whether pension scheme members owe money to the Government.
NHS pension members, including practice managers, GPs and other staff, affected by McCloud and whose pensionable service for the years between 1 April 2015 and 31 March 2022 was placed back (known as rollback) in the 1995/2008 pension ‘legacy’ scheme may see an adjustment to their pension tax position as a result.
This is because the rollback of their pension for those years could have an impact on annual allowance charges, which are taxes that apply when pension pot growth exceeds a certain limit in a tax year.
It could also affect lifetime allowance charges, the total amount that can be built up in pension savings without incurring a tax charge.
HMRC’s updated digital service aims to help affected pension scheme members reassess their tax position and make an application for a refund or compensation if it is calculated they have overpaid tax charges.
Alternatively, members who discover they have underpaid tax charges will be able to arrange for payments they owe.
HMRC has said the service is now an improved one, with less information required to complete the process and the ability to save the progress of an application and return to it later (but within nine months).
There is also a new ‘triage’ system so members can check whether they are affected by the McCloud remedy in the first instance and then determine which parts of the service they need.
Graham Crossley, NHS pension expert at wealth management company Quilter, said: ‘This new service has the potential to provide significant benefits, potentially facilitating thousands of pounds in rebates for members.
However, he added that ‘the comprehensive nature of the service, which spans hundreds of pages, may pose challenges for some members in navigating and understanding the full scope of the information’.
Mr Crossley added that there is support in place to help, in particular the NHS Business Services Authority (NHSBSA) Cost Claim Back Scheme, which allows members to claim up to to £1,000, including VAT, for accountancy services related to the use of the HMRC digital service for completing applications.
‘Overall, while the updated digital service from HMRC represents a significant step forward, the additional support from schemes like NHSBSA will be crucial in helping members navigate the complexities and maximise their potential rebates,’ Mr Crossley said.
Before being able to use the HMRC digital service or make a request for refunds, members will need to have what is called a remediable pensions savings statement, which contains key details about the tax years in the ‘remedy’ period 1 April 2015 and 31 March 202 .
These are due to be sent out to relevant members by the deadline of 6 October this year, said Mr Crossley, which makes the newly launched digital service particular ‘timely’.
What is the McCloud remedy?
On 1 April 2015, the NHS Pension Scheme (NHSPS) was reformed.
As part of that process, older members who were close to retirement received some protections, meaning they would not be moved into the new reformed scheme.
But a legal case was brought against the Government, arguing that this discriminated against some younger pension scheme members, who did not enjoy the same protections.
In 2018, the Court of Appeal agreed that this amounted to age discrimination.
Following a consultation, the Government came up with a solution, called the McCloud remedy.
Under this, in October 2023, the Government automatically ‘rolled back’ members with no protection from the reforms into their legacy scheme (the 1995/2008 scheme) for the seven-year period to which the remedy applies (2015 to 2022).
On retirement, these members will then have a choice of whether they receive the 1995/2008 scheme or the 2015 scheme benefits for this period.
A version of this story was first published on our sister title Management in Practice.
