This appears to be an area where HMRC are very reluctant to clarify the wording or giver any help.
Examples given in PTM133810 are very vague and do not make it clear what period of time HMRC deem to be relevant.
People use this forum as a form of clarification, after all "Tax doesn't have to be taxing", however when forum users try to understand the rules that are "Taxing", HMRC respond with a standard phrase of "HMRC cannot answer this as it relates to financial advise which we are not authorised to give". Seeking clarification is not financial advice.
Maybe the question below will get answered because even IFAs get confused with the rules;
A person has £900,000 is savings and contributes £4,000 to a workplace pension, they also for the past 10 years pay AVCs totalling £10,000 per year.
Three years before they retire they decide due to changes to government pension legislation (abolishment of the LTA and increase of AA to £60k) said person decides to increase their pension savings by opening a SIPP and depositing £17,000 (£21,250 after tax relief)
Now as I understand this is now classified by HMRC as the relevant time with regards to whether pension recycling has taken place, if it is found to have been pre planned?
The following year said person pays £27,000 (£33,750 after relief) in to their SIPP which is purely funded by earning, and the the same amount the following year.
Year 10, 4 years after the contributions to the SIPP were started said person retires taking their AVC lump sum of £100,000, no further contributions to made any registered pension scheme in the year of retirement or the two following years.
Now the clarification that is sought is how the cumulative figure in the above example is made up. The first substantial increase of £21,250 (year 7) is added in addition to two further years contributions of £33,750 totalling and increase of £88,750 or is the cumulative increase the difference between year 7 and years 8 and 9, i.e. £12,500 plus £12,500 totalling £25,000?
Possibly I am not understanding the rule correctly, hence trying to seek clarification, because of the qualifying period of 2 years prior and 2 years after the PCLS is taken, that's if an AVC is classified as a PCLS?
Is it therefore and increase from the original £14,000 (normal workplace pension of £4,000 plus AVCs of £10,000) which equates to £23,750 in year 8 and the same in year 9 totalling a cumulative increase of £47,750?
