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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I asked my employer to do a bonus sacrifice in March

Customer Question

I asked my employer to do a bonus sacrifice for me in March 2014, as i wanted it to count for the 2014/15 tax year as i need to fulfill my 3 years carry forward. On my March paysip issued 25th March 2014 is shows the bonus sacrifice and total pension contributions for the 2014/15 tax year are correct. However my IFA wrote to Blackrock the pension provider as its a GPP and they sent him a statement showing the bonus sacrifice contributions had actually gone into the scheme and been invested on the 25th April 2015 ie in the 2015/16 tax year. For my carry forward to work out the bonus sacrifice would need to cont for the 2014/15 tax year. Based on when the contribution was scarified ie 2014/15 and tax relief received and when the money actually went into the pension scheme/invested in 2015/16 which Tax year should i report to the HMRC that the pension contribution should relate to? And can use my full annual pension allowance for 2015/16 as no contributions have actually gone in for the 2015/16 tax year?
Submitted: 9 months ago.
Category: Tax
Expert:  TonyTax replied 9 months ago.
Hi. If you look here (click the question starting "My employer deducts my pension contributions each month....) it says that contributions need to reach the pension provider by the 19th of the following month or the 22nd of the following month if paid electronically so it doesn't look good from a tax relief point of view but its unlikely to be spotted by HMRC. If it were me, I'd claim the tax relief as per my payslip. Only an audit of the plan provider's records would show up the apparent missing of the deadline date. Up to 8 April 2015, how much of the the annual allowance that has been used has been based on a pension input period that doesn't necessarily align with the tax year unless the provider has made a nomination to align the PIP which by default runs to the anniversary of an individual joining a scheme to the tax year which runs from 6 April to 5 April. From 9 July 2015, pension input periods have been aligned to the tax year so in 2015/16, there are two or three pension input periods as you will read here. Transitional provisions mean that contributions up to £80,000 made in the pension input period ending on or before 8 July 2015 will not be subject to an annual allowance charge. Up to £40,000 of the £80,000 allowance for 2015/16 could be used for contributions made between 9 July 2015 and 5 April 2016. You should discuss whether the transitional provisions for pension input periods will help you maximise your tax relief with with your pension provider given that for 2015/16, there was effectively an annual allowance of £80,000. I hope this helps but let me know if you have any further questions.
Customer: replied 9 months ago.
as the bonus sacrifice tax relief was already claimed by the employer as the contribution is paid gross, so would it not be irrelevant that it when it was invested?
Expert:  TonyTax replied 9 months ago.
As it was an employer contribution, they will claim tax relief for the accounting period during which it was paid. So, it would be academic as far as the company is concerned as it is your pension input period not theirs. The contribution will fall into your personal pension input period which as I said in my previous post runs to the anniversary of an individual joining a scheme unless the pension provider has already aligned it to the tax year. For an unaligned PIP, whether you have exceeded the annual allowance is based on the contributions credited to the pension input period ending in the tax year, ie as if the PIP and the tax year were aligned. The annual allowance of £40,000 is based on the tax year. You should ask for an analysis of all contributions made for each pension input period which will tell you whether you have lost the unused relief for the oldest year and, consequently, whether the contribution your employer made via a salary sacrifice in 2015/15 has to be treated as made in 2015/16. Based on what you have told me, the contribution did not reach the provider in time to be counted as a 2014/15 employer contribution (19 April 2015 or 22 April 2015) and so it would be counted as a 2015/16 contribution. If I were you, I'd ask the provider if anything can be done to rectify the situation as otherwise, you will lose some unused allowance brought forward through no fault of your own.
Customer: replied 9 months ago.
Hi Tony this link here says if contributions are made by net pay arrangements it's the date that the contribution is deducted from the payslip that counts for annual allowance purpose, would you agree ?https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm053200#IDAG0WKD
Expert:  TonyTax replied 9 months ago.
That would make sense. Many employees pay their contributions this way but they have no idea when the payment is handed over to the pension plan provider. So, if your contribution was made under the net pay arrangement, the date of payment will be the date of deduction from your pay.
Customer: replied 9 months ago.
I assume salary sacrifice and bonus sacrifice are both net pay arrangements, as the contributions went to the pension provider Gross?
Expert:  TonyTax replied 9 months ago.
You weren't taxed on the bonus and the contribution was paid gross so it will be a net pay arrangement. Look here for the definition of a "net pay arrangement".
Customer: replied 9 months ago.
It still worries me that the scheme is a GPP and under the heading Date contribution paid - personal and group personal pension schemes, it says it would be the date the pension scheme recieves the payments, see link againhttps://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm053200#IDAG0WKDalso this link says that GPP's cannot accept net pay arrangementshttp://www.hmrc.gov.uk/manuals/cogmanual/cog913560.htmDespite this, Do you think as I used salary sacrifice and bonus sacrifice, and the contributions were paid to the pension provider Gross before paying tax and receiving tax relief, as employer contribution, this will be ok to count for the previous tax year?
Expert:  TonyTax replied 9 months ago.
There are two things that you need to find out: 1 Is the pension scheme a Group Personal Pension Scheme? If it is, the the date of payment is when the pension contribution is received by the plan provider. A salary or bonus sacrifice contribution is an employer contribution. The employer gets the tax relief. 2 As at 5 April 2015, what was the start date and end date of the pension input period? From 9 July 2015, all pension input periods run in alignment with the tax year, 6 April to 5 April. For 2015/16, there are two or three PIPs, one from 6 April 2015 to 8 July 2015 and one form 9 July 2015 to 5 April 2016 another one if your personal PIP was not aligned to the tax year and ended before 8 July 2015. You have an annual allowance of £80,000 for the first period and £40,000 of that can be used in the second period. That means that a total of £80,000 could have been contributed in 2015/16. These are the transitional provisions for 2015/16 only. The annual allowance works on a tax year basis. Once you know what your pension input period was prior to the change to align it with the tax year for everybody (yours may already have been changed by the provider previously to make administration easier) then you will be able to work out if the unused relief can be claimed in 2015/16. The earliest year's unused relief is absorbed first. You don't need to report any salary or bonus sacrifice pension contributions to HMRC as the contribution is an employer one, not a personal one. Read the notes here and use the annual allowance calculator here to see how the contributions will be allocated once you know the PIPs.
Customer: replied 9 months ago.
Yes the scheme is definitely a GPP.I will find out what the pension input perionds are but pretty sure it will be 4th April 2015 to 5th April 2015
Expert:  TonyTax replied 9 months ago.
There are two different considerations here: 1 For tax purposes, your pension contribution tax relief is based on the payments made between 6 April and 5 April inclusive. 2 The pension input period which could have been based on the anniversary of your joining the pension plan is used simply to judge whether an individual has stayed within the annual allowance or exceeded it. If it has been exceeded, then an annual allowance charge will follow. For tax purposes, the contribution payment date is the date it appears on the payslip. For annual allowance charge purposes, it could be the date it appears on the payslip or the date it was received by the plan provider. As far as I'm concerned, the sacrifice payment was made in 2014/15 for tax purposes but not necessarily for annual allowance purposes. Therefore, it should absorb the three years unused relief.
Expert:  TonyTax replied 8 months ago.
Hi.I'm just following up to find out if my answer helped or if you have any further questions.

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