Taxation of Newstart payments for those who left BT and went straight into retirement
If you left BT under the Newstart scheme in the period March 2001 to December 2007 and were taxed in full on your Newstart leaver payment, then you should find the following information to your benefit.
HMRC (HM Revenue & Customs) has reviewed its approach to the taxation of leaver payments in respect of those who took Newstart and then went straight into retirement. The approach that has been applied since 2001 is that the Newstart leaver payments of those leaving BT and going straight into retirement have been taxed in full (whereas those who do not go into retirement straight away have the first £30,000 of their leaver payment paid tax-free). If this situation applies to you, this review therefore means that you may be able to reclaim the tax paid on the first £30,000 of your Newstart leaver payment.
BT has been informed of HMRC’s decision to review its approach and BT has identified from its own records all those BT Pensioners who have been taxed in full on their Newstart leaver payments. It has passed these details on to HMRC. BT is writing to all those affected, advising them of the change of approach and informing them that HMRC will be contacting them directly by the end of April 2008. In the meantime, individuals in this situation need take no further action until the receipt of the letter from HMRC.
We understand that HMRC may pay a ‘repayment supplement’ to individuals in respect of interest on the sums refunded. We are also aware that individuals seeking a reclaim of tax from HMRC usually must do so within five years of the end of the tax year relating to the sums being reclaimed; as far as we are concerned, HMRC’s new approach affects all those leaving on Newstart terms and going straight into retirement since 2001 and that no-one therefore should be refused a rebate on the grounds that they are out of time. Refunds of tax in this situation would appear also to encompass those who have died in retirement and whose estate should thus benefit from any refund which is available.
Connect notes from BT’s letter that BT is not able to provide any further information. Connect is in the same position and cannot supply any further details. Furthermore, we regard that taxation is between the individual and HMRC, and is not something on which Connect can provide advice or representation. The taxation of BT pensions is handled by:
HMRC North Wales Area Compliance
Wrexham Technology Park
Individuals should therefore deal directly with the HMRC tax office in Wrexham in this respect. If you are in this situation and have not heard from HMRC by the beginning of May, you should contact HMRC directly.
We should reiterate that the only people affected by this change of approach are those who have left BT on Newstart and who went straight into retirement (i.e. those who drew their BTPS pension immediately on leaving BT). The vast majority of Newstart leavers will not have drawn their pensions immediately; they will thus have received the first £30,000 of their Newstart leaver payment tax-free and will not be entitled to any further refund.
Finally, Connect would like to pay tribute to the work of the group of BT Pensioners who, by their dogged pursuit of this issue over the past 6 years, have brought about this review of HMRC’s approach to the taxation of Newstart leaver payments.