How to inform HMRC about a lump sum death benefit payment

You must calculate the member’s available lump sum and death benefit at the time of benefit payment to determine whether a death benefit chargeable amount has been incurred. You only need to do this if the deceased member was under 75 years old at the time of their death. If they were 75 years or older, the scheme will deduct the required tax.

To check whether a chargeable amount has been incurred, you must calculate the following:

• available flat rate amount of the member
• Capital and death benefit at the time of payment of benefits

You should be careful and act based on the information available to you.

What you have to do as a legal representative

The death benefit for most people is £1,073,100. It could be more if the deceased member had protected benefits.

It is your responsibility to check whether a chargeable amount arose after the member’s death and whether a corresponding benefit accrual occurred (RBCE).

A RBCE A payment occurs when the beneficiaries of a deceased member are entitled to a one-time death benefit. This uses up some of the member’s available capital and death benefit.

You must check whether the deceased member’s available allowance covers the payments made, taking into account the following:

• protected allowances
• crystallized amounts from previous RBCEs that have occurred in the member’s life, thereby reducing his or her available allowance

If you calculate a chargeable excess over the lump sum and death benefit, you must report this to HMRC.

You should complete the information on this form before printing and sending the details to HMRC.

What you will need

To fill out the form you must provide the following information:

• Your name, address and contact details
• Date of birth, date of death, social security number of the deceased member, details of any protected allowance and amount in excess of the flat-rate death benefit (or its protected allowance).
• Details of the deceased member’s pension fund
• Name, date of birth, address, Social Security number, and the total amount of benefits received for each beneficiary

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What happens next

Once we receive the form, we will charge each beneficiary the appropriate fee. The basis for this is your marginal tax rate.

We cannot collect fees until the tax year has ended. This is because we will not be able to determine their marginal rate until that time.

If the beneficiary completes a self-assessment, we cannot increase the fee until they have filed their tax return.

We will send the notice to the beneficiaries by post. This includes the fee reference and the amount due.

When paying, you must use the 14-digit fee reference. This way we can allocate the payment correctly.

If the beneficiary does not agree, they can appeal to HMRC. Instructions for filing an appeal can be found in the fee notice.

You may file an appeal in writing within 30 days of the date of notice.