# The Postal Services Act 2011 (Taxation) Regulations 2012, Note: Explanatory note

Extent: E+W+S+N.I.

(This note is not part of the Regulations)
The Postal Services Act 2011 (c. 5) (“the Act”) makes provision for the transfer of the historic deficit of the Royal Mail Pension Plan (the “RMPP”) to the government. Part 2 of the Act provides powers for the Secretary of State to establish a new statutory pension scheme (“the new public scheme”), transfer rights from the RMPP to the new public scheme, remove liabilities from the RMPP and transfer assets from the RMPP to the government. These Regulations make provision in relation to the taxation consequences of the restructuring of the RMPP and the new public scheme in relation to accrued rights of members of the RMPP and the transfer of assets of the RMPP.
Regulation 1(1) provides for the Regulations to come into force immediately after the coming into force of both the first order made under the Act effecting the transfer of accrued rights from the RMPP to the new public scheme and the first order made effecting the transfer of the assets of the RMPP. Regulation 1(2) provides that regulation 3 will have effect in relation to the accounting period which is current on the date on which the first order effecting the transfer of accrued rights comes into force and subsequent accounting periods. The power to make regulations with limited retrospective effect is found in section 23(5) of the Act. Regulation 1(3) provides that regulations 4 and 5 will have effect in relation to accounting periods beginning on or after the date on which the first order effecting the transfer of accrued rights comes into force.
Regulation 2 defines the terms used in these Regulations.
Part 2 deals with corporation tax.
Regulation 3 makes provision for the taxation consequences of the removal of the pension obligations from the accounts of Royal Mail Group Limited and Post Office Limited. The Regulation provides that where either Royal Mail Group Limited or Post Office Limited recognises a debit or credit in its accounts in accordance with generally accepted accounting practice and the debit or credit is recognised in consequence of a transaction in connection with an order under section 17(2), section 18, section 19 or section 21 of the Act, no amount is to be brought into account in respect of the debit or credit in computing the profits, gains or losses of that company for corporation tax purposes.
Regulation 4 makes provision which extinguishes unused trading losses incurred by the Royal Mail Group Limited in relation to deductions given for contributions to the RMPP, with one exception, which would otherwise have been carried forward from accounting periods prior to the accounting period in which the order first made under section 17(2) of the Act comes into force. The exception relates to contributions paid to the RMPP in advance of 31st March 2012 but which are in respect of amounts falling due after that date.
Regulation 5 makes similar provision for extinguishing the unused trading losses incurred by Post Office Limited in relation to deductions given for contributions to the RMPP.
Regulation 6 provides that the BIS (Postal Services Act 2011) Company Limited (“BCL”) shall be exempt from corporation tax for accounting periods ending before 1st April 2015. BCL is a fund established under section 21(1)(c) of the Act for the purposes of holding assets of the RMPP prior to their disposal.
Part 3 deals with income tax.
Chapter 1 of Part 3 makes provision in relation to the transfer of accrued rights from the RMPP to the new public scheme.
Regulation 7 provides for the new public scheme to be treated as a registered pension scheme for the purposes of Part 4 of the Finance Act 2004 (c. 12) (“FA 2004”). Registered pension schemes are those which meet certain requirements and qualify for tax-favoured treatment. Regulation 8(1) provides that the transfer of accrued rights from the RMPP to the new public scheme and the transfer of the assets of the RMPP to the government is to be treated as a recognised transfer of sums or assets within the meaning of section 169(1) of FA 2004. This prevents the transfer giving rise to an unauthorised payment charge under Chapter 5 of Part 4 of FA 2004. Paragraphs (2) to (5) of regulation 8 set out how the transfer is to be treated for the purposes of certain provisions in the Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006 (S.I. 2006/499) to ensure that rights under the new public scheme are treated as if they were rights under the RMPP. This provision is capable of having retrospective effect. The power to make regulations with limited retrospective effect is found in s23(5) of the Act.
Chapter 2 of Part 3 ensures that any transitional provisions in relation to the changes to pensions legislation which came into force on 6th April 2006 (“A day”) that applied to accrued rights under the RMPP will apply in the same way to the new public scheme after the transfer. These provisions are contained in Schedule 36 to FA 2004 and the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572).
Regulation 9 provides that where an individual was entitled to enhanced protection from the lifetime allowance charge in respect of an arrangement under the RMPP, the protection will continue after the transfer in the new public scheme.
Regulation 10 provides that if a member of the RMPP were entitled to take benefits before normal minimum pension age, the member would continue to be entitled to do so under the new public scheme.
Regulation 11 provides that individuals who were entitled to lump sums exceeding 25% of uncrystallised pension rights on 5th April 2006 (and have not claimed primary or enhanced protection) will continue to be entitled to take these lump sums after the transfer of benefits to the new public scheme.
Regulation 12 makes provision for individuals who were entitled on 5th April 2006 to take all their uncrystallised rights as a lump sum known as a stand-alone lump sum. These individuals will continue to be able to take a stand-alone lump sum under the new public scheme after the transfer.
Regulation 13 makes provision in relation to life cover lump sums which may be paid where a member dies after the age of 75. Where a member had a right to a life cover lump sum under the RMPP, this right will continue to apply to the new public scheme after the transfer.
Regulation 14 applies to dependants’ scheme pensions payable in respect of members of the RMPP where the rule set out in paragraphs 16A, B and C of Schedule 28 to FA 2004 limiting the scheme pension had been disapplied and ensures that the limit will continue to be disapplied once the pension is payable by the new public scheme.
Regulation 15 applies to serious ill-health lump sums and pension protection lump sum death benefits. The regulation prevents an individual who had an actual right to payment of a relevant pension at A day and was, therefore, prevented from being paid a serious ill-health lump sum under the RMPP, being paid a serious ill-health lump sum after the transfer. It also allows for a serious ill-health lump sum or pension protection lump sum death benefit that would have been payable as an authorised payment under the RMPP, to be paid as an authorised payment after the transfer. This prevents an unauthorised payment charge arising.
Regulations 16 to 18 provide that pension death benefits paid or capable of being paid without a tax charge arising to dependent children aged 23 or over under the RMPP can be paid by the new public scheme. These provisions apply to specified payments made to children aged 23 or over who are still in full time education or vocational training or who, on reaching that age or ceasing full time education or training, are suffering from physical or mental deterioration which is sufficiently serious to prevent normal employment and to financially dependent children aged 23 or over (for example certain carers). Regulation 18 allows for payments under the new public scheme to meet the conditions where transitional protection was capable of applying under the RMPP because entitlement to a pension death benefit for such a child was subject to the discretion of the trustees of the scheme and that discretion was capable of being exercised so that entitlement could have arisen before 1st July 2008.
Regulation 19 makes provision for lump sum death benefits payable in respect of the death of a member of the RMPP who died before A day. Where, after the transfer, a lump sum is paid in respect of the death of such a member which would, had the transfer not taken place qualified for transitional protection under the RMPP, this protection will continue in the new public scheme.
Chapter 3 of Part 3 contains provisions relating to the liability of the scheme administrator to pay an individual’s annual allowance charge, fixed protection, calculation of pension input amounts, double taxation relief arrangements and adverse changes to tax treatment resulting from the transfer.
Regulation 20 applies where, before the transfer, an individual was entitled to request that the scheme administrator of the RMPP pay the annual allowance charge for the tax year in which the transfer takes place on the individual’s behalf in return for an actuarial reduction to benefits under the scheme (this is known as “scheme pays”). The regulation provides that the transfer is treated as a transfer of all the sums or assets representing rights under the RMPP so that the individual may give a scheme pays notice (specifying that the individual and the scheme administrator will be jointly liable for the annual allowance charge) to the new public scheme instead of to the RMPP.
Regulation 21 provides that individuals who are active members of the RMPP immediately before the transfer will not lose fixed protection (which operates to reduce or mitigate the lifetime allowance charge) under Schedule 18 to the Finance Act 2011 (c.11) as a result of the transfer. It provides that where rights under the new public scheme increase in accordance with the retail prices index this will not result in the loss of fixed protection.
Regulation 22 modifies the rules that apply when calculating the pension input amount in circumstances where, as a result of the transfer, there has been an adjustment to an individual’s benefits under the new public scheme and a corresponding adjustment to that individual’s benefits under the RMPP. In certain cases, for example some early retirements, the new public scheme may make an actuarial reduction to an individual’s benefits and the RMPP may increase the member’s benefits by a corresponding amount. Regulation 22 provides that the reduction and increase are disregarded for the purposes of calculating the pension input amount so that adjustments relating to the transfer do not artificially give rise to an annual allowance charge.
Regulation 23 ensures that where the taxation of a pension under a double taxation relief arrangement changes as a result of the transfer, the tax charged in the United Kingdom will not exceed the tax which would have been paid if the transfer had not taken place and the pension had continued to be paid by the RMPP. It applies where a member of the RMPP had pensionable service in respect of the period prior to 1st October 1969 (when Royal Mail was a government department); the pension in respect of that member is being paid to a person resident outside the UK in a country which has entered into a double taxation convention and, as a result of the transfer, the UK has acquired taxing rights in respect of that pension under the double taxation convention.
Regulation 24 applies where the taxation of a member’s accrued rights that have been transferred to the new public scheme or the member’s rights under the RMPP changes as a result of the transfer in circumstances which are not otherwise covered by these Regulations. The tax charged under the specified provisions in respect of those rights after the transfer will not exceed the tax which would have been paid had those rights continued to be held under the RMPP.
Part 4 deals with stamp duty, stamp duty land tax and stamp duty reserve tax.
Regulation 25 provides that an instrument making or executing the transfer of assets from the RMPP to the government (“the assets transfer”) is not chargeable to stamp duty.
Regulation 26 provides that land transactions entered into on, or in consequence of, or in connection with the assets transfer are exempt from the charge to stamp duty land tax. Regulation 27 provides that land transactions entered into on, or in consequence of, or in connection with, the assets transfer are not notifiable transactions within section 77 of the Finance Act 2003.
Regulation 28 provides that any agreement to transfer chargeable securities made in relation to, in connection with, or by or under, the assets transfer is not chargeable to stamp duty reserve tax.
A Tax Information and Impact Note covering this instrument will be published on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.

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Source: https://www.legislation.gov.uk/uksi/2012/764/note (the official version)
Page: https://openlegislation.uk/postal-services-act-2011-taxation-regulations-2012/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.