SPP urges HMRC to reconsider pension tax

The Society of Pension Professionals (SPP) has urged HMRC to rethink key aspects of its proposed inheritance tax (IHT) framework for pensions, warning that the current approach places unrealistic obligations on pension schemes and could create significant delays and confusion for families following a death. In its response to HMRC's technical consultation on the implementation of IHT on pensions from April 2027, the SPP highlights a range of operational, legal and practical concerns that it believes must be addressed before the new regime is introduced. Among its key concerns, the SPP argues that pension scheme administrators and insurers cannot reasonably be expected to determine whether beneficiaries qualify for IHT exemptions, particularly where complex long-term residency rules apply. Instead, the SPP believes this responsibility should sit with Personal Representatives (PRs), who are already responsible for assessing the wider estate.

The SPP is also calling for a significant simplification of reporting requirements, questioning why schemes should be required to provide information on benefits that fall entirely outside the scope of IHT and highlighting areas where reporting obligations appear inconsistent or duplicative. Additionally, the SPP’s consultation response warns that several proposed deadlines are too restrictive and fail to reflect the practical realities of verifying identities, gathering information and obtaining valuations. In addition, the SPP has identified a number of technical drafting issues and operational uncertainties, including concerns around withholding notices, payment notice processes, overseas estates, the treatment of joint Personal Representatives and the data protection implications and potential complications that could arise in cases of intestacy and revocation of withholding notices when dealing with a Prospective Personal Representative (as opposed to a Personal Representative).

Shayala McRae, Chair of the SPP’s Legislation Committee said, “Although HMRC has made good progress in engaging with industry, further refinements are needed to ensure the system is workable, proportionate and does not create unnecessary delays for bereaved families. The pensions industry is committed to helping make government reforms work, but the current proposals place significant responsibilities on schemes that are simply not practical in many cases. Determining inheritance tax exemptions often requires information that pension schemes simply do not have and cannot reasonably obtain. The SPP’s response therefore highlights a number of ways in which a framework that is both operationally realistic and effective can be delivered.”

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