HM Revenue & Customs (HMRC) has dropped a court case centred on an individual exceeding their lifetime allowance, potentially opening themselves up to legal challenges from savers.
The lifetime allowance (LTA), which was introduced in 2006, is the limit on the amount of money that can be saved in a pension before triggering a tax charge of 55 per cent.
The original case, the First Tier Tribunal, found in Gary Hymonson’s favour, ruling that he accidentally breached the rules and should retain his LTA. HMRC had intended to appeal this decision.
The case in question had a lifetime allowance limit of £1.8 million, which was the fixed protection limit in 2012. The limit changed in 2014 to £1.5 million and then again in 2016 to £1.25 million before being reduced to the current rate.
Gary Hymanson asserted that he had accidentally failed to cancel a standing order that was set up to automatically pay into his pension pot.
HMRC revoked his fixed protection, with Mr Hymanson insisting that he understood he could not make any more lump sum contributions to his main scheme, but did not realise he had to stop the standing orders he had set up for his three other pension schemes.
HMRC was due to appeal the case but has now withdrawn, with the potential for savers who have accidentally exceed their lifetime allowance limit to take action.
More than 100,000 people in the UK currently have a fixed lifetime allowance, securing against reductions in the limit.