What is Allowance Commencement Lump Sum recycling
Recycling is when an individual has taken the pension commencement one-off sum with the objective of paying this back in to a brand new or existing pension arrangement to generate further tax allowances, and then a successive annuity commencement one-off payment sum later .
HMRC may challenge the recycling of annuity commencement one-off payment sum in certain circumstances as Recycling refers to a situation in which an individual draws a tax-free one-off sum and then reinvests into a pension, receiving tax breaks. The guidelines also apply if the plan holder withdraws the annuity commencement one-off sum but funds the pension increase from other sources, or has other resources that could h ave been utilized. HMRC may look to withdraw the tax relief in these circumstances.
The individual receives an allowance commencement one-off sum and the successive contribution to an allowance is bigger than it would of sometimes have been.
The contribution is made by the plan holder or by somebody else. The source of the payments are unimportant from an HMRC viewpoint. The recycling was planned.
The allowance commencement payment sum and any other annuity commencement lump sum received in the prior 12 months is more than 1 per cent of the lifetime allowance, which would be 18,000 in 2010/11.
The increase in the annual allowance contribution is a little more than 30 percent of the amount received from the PCLS
One-off sum benefits may also be due on the passing of a scheme member before an annuity scheme is crystallised Provided that these benefits fall in the lifetime allowance these benefits will remain tax-free.
A way to avoid the potential loss of tax subsidies is to take advice. Ask your financial adviser to use a pension lump sum calculator to make certain that you remain within the rules which are set out by HMRC.
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Early Pension and Early Retirement are key issues looked at by My UK Pension Plan, an online service which connects individuals with Financial Advisers
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