The Postal Services Act 2011 (Taxation) Regulations 2012

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Who is likely to be affected?

Royal Mail pension schemes and members of Royal Mail pension schemes, Royal Mail
Group Limited (RMGL), Post Office Limited (POL) and BIS (Postal Services Act 2011)
Company Limited (BCL).

General description of the measure

This measure will ensure that the tax consequences of the Government taking over the
Royal Mail pension deficit are broadly tax neutral.

Policy objective

This measure supports the Government's commitment to secure a sustainable future for the
universal postal service by ensuring that unintended tax consequences do not arise as a
result of the transfer of Royal Mail's pension deficit to Government.

Background to the measure

This measure removes unintended tax consequences which could arise as a result of the
transfer of assets and liabilities to enable the Government to take over the pension deficit in
the Royal Mail Pension Plan (RMPP) and makes other tax provision connected to the
reorganisation. Informal consultation on the provisions relating to the pension schemes has
taken place with the Department of Business Innovation and Skills, the Trustees of the
RMPP, the Royal Mail Group and representatives of the Royal Mail unions. The corporation
tax and stamp tax provisions only relate to RMGL, POL or BCL and appropriate discussion
was held to ensure that the provisions apply as intended.

Detailed proposal

Operative date

The measure will have effect immediately after the first order made under section 17(2) of
the Postal Services Act 2011 and the first order made under section 21(1) of the Postal
Services Act 2011 come into force.

Current law

Tax relief is available for pension saving under Part 4 of Finance Act 2004. The RMPP is a
registered pension scheme for tax purposes and pension saving by members of the RMPP
attracts tax relief.

RMGL, POL and BCL are subject to the normal rules for corporation tax, income tax and
stamp taxes.

Proposed revisions

The new legislation will protect the tax privileges of members of the RMPP when their
pension rights are transferred to a new government pension scheme. It will ensure that the
new public pension scheme which takes over the pension rights will be a registered pension
scheme and that the transfer of rights made in accordance with the orders under
section 17(2) and 21(1) of the Postal Services Act 2011 will not lead to tax charges on the
RMPP and its members as unauthorised payments. Provision is also being made to maintain
existing protections for members of the RMPP so that entitlements they have in the RMPP
do not give rise to additional tax charges when paid by the new public scheme.
The legislation also includes corporation tax and stamp taxes provisions in relation to RMGL,
POL and BCL. It will ensure that charges and deductions do not arise for RMGL and POL as
a consequence of their accounting in recognition of the changes to the pension
arrangements. Provision is also being made to extinguish certain trading losses of RMGL
and POL for corporation tax purposes, to exempt BCL from corporation tax for accounting
periods beginning and ending before 1 April 2015 and to disapply stamp taxes on the
transfer of RMPP assets to BCL.

Summary of impacts

pension act impact.png

Monitoring and evaluation
The changes will be monitored in the usual ongoing compliance processes.

Further advice

If you have any questions about this measure please contact Beverley Davies on 020 7147
2869 (email: beverley.davies@hmrc.gsi.gov.uk) about the pension changes or Mark
Anderson on 020 7147 2621 (email: mark.anderson@hmrc.gsi.gov.uk) about the corporation
tax and stamp taxes changes.

Declaration
David Gauke MP, the Exchequer Secretary has read this Tax Information and Impact Note
and is satisfied that, given the available evidence, it represents a reasonable view of the
likely costs, benefits and impacts of the measure.