HMRC clarifies pension relief at source rules

HMRC has clarified its guidance on changes affecting pension scheme administrators that reclaim tax relief using the relief at source (RAS) method, as a result of the introduction of the Scottish rate of income tax (SRIT)

The updates follow recent consultation responses on the draft legislation, The Registered Pension Schemes (Relief at Source)(Amendment) Regulations 2018, and are intended to bring clarity regarding relief at source for SRIT for high profile customers within the pensions industry.

HMRC estimates this measure will impact approximately 1,065 pension schemes operating RAS.

It is not expected that the annual claim and annual returns currently submitted by pension scheme administrators will change, but both reports will need to be submitted to HMRC earlier in the 2017 to 2018 tax year, and later tax years, than at present.

There is a new deadline of 5 July for annual claims, and annual returns. Additionally, HMRC will need scheme administrators to provide details of excess relief claims and to repay the overpayment of tax relief within 30 days, where currently there is no time limit for making these claims.

The changes are intended to make sure that the correct rate of income tax will be applied by the pension scheme administrator as HMRC will be able to advise the correct rate of relief earlier in the preceding tax year.

This together with a common due date for filing the annual claim and the annual return of individual information aims to reduce the administrative burden on pension scheme administrators who have to take into account those who are subject to SRIT.

The measure will have effect for the tax year 2017/18 and later tax years. Regulation 3 has effect for interim claims for tax months ending on or after 5 April 2018.

The measure reduces the period for making an annual claim from six months to three months following the end of the year of assessment.

The measure reduces the period within which an interim claim may be made from six months to three months, and introduces requirements for claiming excess relief in an interim claim.

HMRC says its latest estimates indicate the measure is expected to have a negligible impact the Exchequer. The requirement for schemes to report and repay excess relief claims within 30 days of discovery will bring money into the Exchequer sooner than at present, but the amounts involved are relatively small, at less than £3m.

Policy paper Pensions Tax: changes to administration of Relief at Source is here.

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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