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Sam
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Category: Tax
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My first pension payment was paid on 4 April as "an advance

Resolved Question:

My first pension payment was paid on 4 April as "an advance until your pension details are set up on our computerised payroll". Tax was deducted using a code 0T. They have included this income in the following tax year. My belief is that as this payment was paid to me in one tax year, that is the year it should be taxed in.
The query is relevant as my marginal tax rate was standard rate in Yr1 and higher rate in Yr2.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Hi

Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.

Payments are usualy treated as being liable to tax on the date they are amde, rather from when theyr are due.

But the key factor is , is that you advsie this was an advance on the first pension payment rather than the first pension payment and this changes the position, to one that says, this gesture on the pension providers behalf, does not then form a tax point on which deuctions should be made, but recognises that this is merely an advance on the payment becoming due.

Whilst there are special rules for authors and the like with advance payments, this does not fall into that remit of being given special treatment, in the samew way an advance of wages also does not form a tax point (as the tax still becomes treated as arising on the official pay day rather than the advance payment day!)

I am sorry to not be able to offer the advsie youw ant to hear, and I am sure the pension dpet are equally frustrated by the matter - as I am sure they would not wish you to suffer more tax than you need to, but they are right on this matter.

If you still in dispute then do write to HMRC who can provide you with an official determination on this matter. You can write to them c/o the address on any correspondance you have received fom HMRC in the last 12 months (they change postal address frequently) but if you would like the latest address its

Pay As You Earn

HM Revenue and Customs

BX9 1AS

United Kingdom


Do let me know if I can be of any furtehr assistance


Thanks


Sam

Customer: replied 2 years ago.

Thanks, Sam

One follow up - you say "But the key factor is , is that you advsie this was an advance on the first pension payment rather than the first pension payment and this changes the position, to one that says, this gesture on the pension providers behalf, does not then form a tax point on which deuctions should be made, but recognises that this is merely an advance on the payment becoming due."

Although they called it an advance, it was not a net sum but stated gross with a deduction for tax, stating a tax code. To me, this is an indication that they were treating it as taxable payment and making it this way because their computerised payroll administration could not cope in time.

Expert:  Sam replied 2 years ago.

Hi

Thanks for your response

May I ask did you receive a further payment on the actual first payment date - (so the make up of the shortfall as it were)

Tax code 0T is when there is no official tax code being used (so payments after leaving, payment away from the main payroll, etc but does ensures that some form of tax deduction is made)- so did the payment made on the first official due date of the payment use a different tax code than 0T? Or also 0T?

Thanks

Sam

Customer: replied 2 years ago.

No further payment, the 4 April payment was the exact amount due. My first payslip was for 8 May and showed a single gross figure that was the total of April advance and my normal May pension, with the April net payment deducted as an advance.

The May payment still used 0T code.

Thanks,

John

Expert:  Sam replied 2 years ago.

Hi John

Thanks for your response

Can I check that Junes payment was the same as Mays payment - in principle - just without Aprils advance added in, and what tax code was used for June please

Thanks

Sam

Customer: replied 2 years ago.

Yes, the June gross was as May (to the penny!). By that time the tax code had been adjusted to K113

Expert:  Sam replied 2 years ago.

Hi

Thanks for your respoisne and being so patient in providing the information I ask for.

Then - as long as you do not hold papers/letter/notification of e4pnsion commencement that states that your pension is not due to commence until after 05th April - then

- based on this fuller picture, I think you have an excellent case to argue in your favour, and I would suggest that you go straight to contacting HMRC and askt hem to review this on your behalf, as it really just appears that the pension provider, did not want to incur penalties for the late file of the monthly report for month ending 5th April. But that you should have had this payment arise and be due tax on the earleir tax year.

Its not just the fact that this is clearly NOT an advance (if the pension start date was before 5th April) but that the payment for May was the same! (and same deductions)

If however you have advise from the pension company that your pension was not due to commence until after 5th April - then I am afraid even inspite oft the advsie offered above - it will then fall as being due in the latter tax year -

Let me know if I can be of any further assistance

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13808
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
Sam and 2 other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Many thanks for your help, Sam. My pension start date was 26 March, the day after my birthday so that's OK. Thank goodness I don't throw things away!

I'm an accountant and have had limited payroll exposure and knew enough that it was not straightforward, so happy enough to have the exchange. My speciality was International Group Reporting, both internal and published accounts. Three years retired, my "work" is now limited to the village hall and editing the village magazine.

I'm rating you 100% - £36 well spent, whether I finally prove my point or not. The amount at risk is over £500.

Expert:  Sam replied 2 years ago.

Hi John

Its nice sometimes just to have someone to "chew the fat over"- so to speak - and you certainly have not lost your essence of payroll knowledge!

And certainly your area of expertise - I am sure will continue to stand you in good stead long past the need and requirement to call upon it!

Ah retirement sounds like bliss (although I cannot complain as Im self employed with my own accountancy firm which allows me the full work/life balance, with dipping into Just Answer throughout the days I choose to work - so it doesnt really get much better whilst I still have to consider the world of work and mortgage payments!)

Have a wonderful day

Sam

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