HMRC withdraws appeal in LA breaching case

Her Majesty’s Revenue and Customs (HMRC) has withdrawn its appeal in a key court case regarding savers who breach their lifetime allowance (LA) fixed protection terms.

Its withdrawal could save those who accidentally breach the fixed protection terms a potential six-figure tax bill.

The case related to appellant Gary Hymanson’s claim that he had accidentally failed to cancel a direct debit into his pension scheme which, HMRC argued, should void the fixed protection on his £1.8m LA.

If the court had ruled in favour of HMRC and Hymanson lost his protection, his LA would drop to £1.05m and any excess above this amount would be subject to a tax charge of up to 55 per cent.

The first tribunal, which took place in November, found in Hymanson’s favour and ruled that, due to the accidental nature of the breach, he should retain his lifetime allowance of £1.8m.
HMRC has confirmed that it will not be appealing the decision.

Commenting on the announcement, AJ Bell senior analyst, Tom Selby, said: “The fact HMRC appears to have admitted defeat in this case suggests those who make similar genuine errors in relation to their lifetime allowance – errors which in some cases could lead to six-figure tax bills – could be handed a tax lifeline.

“Anyone who has accidentally breached their fixed protection by contributing into a pension in error now has a strong case to go back to HMRC where a tax charge has been applied.

“The numbers involved could be significant - an AJ Bell Freedom of Information request recently found over 12,000 investors have notified HMRC they have lost one of the various forms of lifetime allowance protection introduced since ‘A-Day’ in 2006.

“Furthermore, anyone in future who accidentally breaches their protection – for example by being automatically enrolled without appreciating the consequences – could challenge the loss of the protection and any tax penalty the Revenue might try to impose as a result.”

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