HMRC Guidance: Claiming Tax Relief at Source for Pension Scheme Members

• Relief at source is a way of giving tax relief on contributions made to pension schemes.
• Pension administrators must claim basic rate tax relief from HMRC and add it to the pension pot.
• Scottish taxpayers liable to Income Tax at different rates may be eligible for additional relief through their tax return.
• Pension administrators must register with HMRC using form APSS 103 and send in any changes to repayment details or who can make repayment claims.

For example, if a member wants to make a £100 contribution and pays 20% tax, they'll only need to pay £80 into their pension scheme, with the scheme administrator reclaiming £20 from HMRC.

Pension administrators are being reminded to review their registration and repayment claims to ensure compliance with HMRC's relief at source rules, particularly for Scottish taxpayers liable to Income Tax at different rates. Relief at source is a way of giving tax relief on contributions made to pension schemes, with members receiving tax relief based on their residency status. The scheme administrator claims the basic rate tax relief from HMRC and adds it to the pension pot, making up any shortfall in the contribution amount.

For example, if a member wants to make a £100 contribution and pays 20% tax, they'll only need to pay £80 into their pension scheme, with the scheme administrator reclaiming £20 from HMRC. However, for Scottish taxpayers liable to Income Tax at no more than the Scottish starter rate of 19%, or who pay no tax, relief is claimed at 20%.

Pension administrators must ensure they have the necessary information about their members, including their employment status and declarations, before claiming tax relief back from HMRC. This includes registering with HMRC using form APSS 103 and sending in any changes to repayment details or who can make repayment claims.

HMRC's relief at source rules require pension administrators to claim basic rate tax relief on contributions made by their members. This applies regardless of whether the member pays tax or not, and the scheme administrator must add the claimed relief to the pension pot. For Scottish taxpayers liable to Income Tax at different rates, relief is claimed at 20% for those paying no tax or up to the Scottish starter rate, while intermediate rate taxpayers can claim additional relief through their tax return.

Pension administrators must also ensure they have the necessary information about their members, including their employment status and declarations, before claiming tax relief back from HMRC. This includes registering with HMRC using form APSS 103 and sending in any changes to repayment details or who can make repayment claims.

Pension administrators must review their registration and repayment claims to ensure compliance with HMRC's relief at source rules, particularly for Scottish taxpayers liable to Income Tax at different rates. Failure to comply could result in incorrect tax relief being claimed or not claimed at all, affecting the pension pot of scheme members.

It is essential that pension administrators understand the relief at source rules and how they apply to their specific situation. This includes knowing which rate of tax relief to claim for Scottish taxpayers and ensuring they have the necessary information about their members before making claims. By taking the time to review and ensure compliance, pension administrators can avoid any potential issues and provide accurate tax relief to their scheme members.

Pension administrators should review their registration and repayment claims to ensure compliance with HMRC's relief at source rules, particularly for Scottish taxpayers liable to Income Tax at different rates.

Source: Original reporting via GOV.UK