Taxman changes tack on pensions

The move represents a change in tack by the taxman. In certain circumstances,
employers were able to make inducement payments to staff for quitting a defined
benefit scheme to join a defined contribution scheme free of tax and NI. HMRC
revealed employers have sought advice on the new tax and NI position.

Existing legislation requires the payment of tax and NI in all circumstances
where employees are paid to switch from a DB to DC scheme. HMRC will honour the
previous positions, where employees had been offered inducements to switch prior
to the latest announcement and were allowed a tax exemption.

Grant Thornton tax partner Mike Warburton said the situation is unusual, as
any cash inducement would have been liable. He also said that employees of
bigger companies handling switchovers to DC schemes are more likely to be

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