Hancock NHS pension plan could be 'tax avoidance'

The government has signed off on a change to pension tax rules for NHS high earners which ‘could constitute tax avoidance’

The Scheme Pays proposal allows doctors to pay an annual allowance tax charge arising from their pension saving in the NHS schemes for the 2019/20 tax year.

This agreement to reimburse doctors pensions would be classed as a change of policy, which is effectively breaking purdah rules during an election period.

Health secretary Matt Hancock said: ‘As you set out, the proposals which you plan to introduce for “Scheme Pays” for the 2019/20 tax year constitutes an example of tax planning.

‘Depending on the detail of how you put the proposed approach into practice, the scheme could constitute tax avoidance.  In deciding on this detail, you should seek to minimise this risk. The proposed measure is therefore incompatible with paragraph 5.6.1.

There has been a push to find a solution to the NHS staffing crisis quickly as pressure is growing ahead of winter. In September 2019 the NHS recorded 4.42m patients on the waiting list which is the highest number ever.

The harsh winter ahead prompted action from chief executive of the national health service, Simon Stevens who sent a letter to health secretary Matt Hancock on 22 November 2019, which said: ‘Given the deferral of the Budget and the calling of an election, it is now clear that a substantive answer to the tapered annual allowance issue is unlikely to be forthcoming until the new tax year, from April 2020.

‘In the meantime there is an urgent operational requirement to remediate further the situation, so as to try and remove barriers to needed clinical staffing over the winter period.

‘To that end, as you know, we have been working with your officials and HMT (Treasury) on an in-year mitigation.

‘This will involve a commitment to make payments to certain clinical staff outside of the NHS pension schemes to restore the value of their pension benefits package, if they have elected to use the “Scheme Pays” facility to settle an annual allowance tax charge arising from of their pension saving in the NHS schemes in 2019/20.’

Health secretary, Matt Hancock’s letter

NHS could pay doctors pension tax ahead of hectic winter

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