Employers warned not to forget anti-forestalling rules

Employers have been warned that anti-forestalling rules, brought in ahead of now defunct regulations to restrict tax relief on pensions to the basic rate for staff earning £150,000, still apply.

The rules were introduced by the Labour government in April 2009 to stop taxpayers making large pension
contributions in advance of the proposed (but now overturned) restrictions to higher-rate tax relief on pension
contributions that would have applied from April 2011.

However, new legislation to be introduced in the Finance Bill 2011 will instead restrict pensions tax relief by reducing the annual tax-free allowance from £255,000 to £50,000 from April 2011. But this does not mean the anti-forestalling rules have been removed.

Tim Johnson, managing director at Gallagher Risk and Reward, urged employers to take care on single premiums for high earners. “If an employer, or employee, decides to top up the pension fund before the end of the tax year, great care must be taken for high earners to make sure they are actually going to get the tax relief they think they will,” he said.

Johnson also warned employers to check the tax situation of anyone waiving a bonus, because if they are earning above the limit, they are unlikely to get the tax relief they were expecting. “Exercise caution because anti-forestalling rules still apply, even though the regulations they were trying to stop people avoiding are not coming in,” he said.

HM Revenue and Customs said: “The reduced annual allowance will come into force in 2011/12. The anti-forestalling legislation is being repealed from then, but remains in force for 2010/11.”

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