There has been some confusion over the issuing of P6 coding notices for death benefit payments that are not taxable. HMRC recognise the problem and have issued a notice on the subject which is reproduced below.
The notice will also be published in the next Pension Schemes Newsletter:
“Pension flexibility - reporting of non-taxable death benefits through RTI
In Pension Schemes Newsletter 72 we gave guidance on the reporting of non-taxable death benefits through RTI from April 2016.
We have received a number of queries from pension payers/providers regarding P6 tax coding notices being issued by HMRC for death benefit payments that are entirely non-taxable (i.e. an entry in data item 173 only of the full payment submission (FPS)).
P6 coding notices are not relevant to these payments. We are currently investigating this to identify why these notices are being issued, however in the meantime scheme administrators should stop reporting these non-taxable death benefit payments with immediate effect. You should continue to keep records of these payments.
You should not report these entirely non-taxable payments at all for 2016 however you will be required to start reporting these again from April 2017 onwards.
This guidance only applies to death benefit payments where the whole of the payment is non-taxable. All other payments including non-taxable elements should continue to be reported as per previous guidance.
Any pension payer/provider who needs further guidance on this please email pensions.businessdelivery@hmrc.gsi.gov.uk and put reporting non-taxable death benefit payments in the subject line of the email
We are sorry for any inconvenience or confusion this may cause.”
