In a leaked letter from financial secretary to the Treasury David Gauke MP to the chairs of the Taxation of Pensions Bill Committee, seen by Corporate Adviser, the government sets out revised forecasts of salary sacrifice – not published in the Autumn Statement papers – that show it expects to get £35m less into the public coffers in 2015/16 than it thought it would. The figure is less than 0.2 per cent of the total potential loss in that year estimated by Corporate Adviser at around £20bn. The projections then go to show downwards revisions of £30m, £25m, £25m and £25m in the following years, which presumes no increased use of the strategy if it remains unpunished.
However, the government is yet to make clear whether these forecasts reflect its estimates of increased salary sacrifice as a result of the pensions flexibility policy or just the change in estimates caused by the inclusion of the reduced £10,000 annual allowance penalty.
Apparently contradicting this figure, a second set of figures in the Policy Costings Document shows the Exchequer Impact of the reduced annual allowance that shows revenue increasing in the first year of the changes as a result of the policy, and then causing a loss of between £50m and £120m a year.
Autumn statementThis section is headed ‘Pensions flexibility – decisions since the Budget’, but the Treasury is yet to make clear how the introduction of the reduced £10,000 annual allowance penalty would lead to it raising less revenue and not more.
A third set of figures, at Table 2.1 of the Autumn Statement document itself, includes a set of figures headed ‘Income tax: Salary sacrifice and expenses, including umbrella companies’ that shows no change in 2014/15 and 2015/16, and then substantial gains to the Treasury.
Towers Watson senior consultant David Robbins says: “The government’s approach seems to be that they have made their projections on the basis that it will make a small loss to the public coffers, and that this will persist for several years because of the threat of penalties for those who take advantage of it. It appears to be taking the attitude that it can cross the bridge of deciding what it has to do about the issue when it comes to it.”
