Tax relief on gross Pension Contribution help please

Wsb5tails

I made a gross £25k pension contribution from savings in January 23.  My Pension provider does not add any tax relief, not even basic rate.  I was told to write to HMRC for the relief which would be paid to me.

I have been expecting £6250 + £1k in respect of the £5k of income that I paid 40% tax on.

HMRC will only accept that I am due the £1k rebate.

I made the additional Pension Contribution to my most recent employers scheme on leaving.  I paid contributions via Salary Sacrifice during employment.  The £25k payment was made to use up Pension Annual Allowance and I did not previously have to file Self Assessment.

I am now retired, living on a DB Pension leaving the DC Pension untouched for another 4 years.

HMRC have hung up on me twice now.  How can I get this resolved?


NB Posted originally in Pensions & Retirement forum

Dazed_and_C0nfused

Was this a contribution to a defined benefit company pension?

And can you post some details from the HMRC calculation.  Specifically has your basic rate band been increased and if so by how much?

Albermarle

Dazed_and_C0nfused said:

Was this a contribution to a defined benefit company pension?

And can you post some details from the HMRC calculation.  Specifically has your basic rate band been increased and if so by how much?

From the OP's original post. It was a one off personal contribution to his DC workplace pension. The pension was normally set up for regular payments by salary sacrifice, and was unable to adapt to a personal contribution and add the basic rate tax as normal.
The pension provider said he should be able to claim the basic rate tax relief and some higher rate tax relief from HMRC. However he is struggling to make progress with HMRC, probably as it is quite unusual for people wanting to claim back basic rate tax relief directly from them .

Dazed_and_C0nfused

I don't ever recollect a gross contribution with no tax relief being made to a DC scheme though.

They always seem to be where net pay contributions can't be made to a DB scheme, usually as too large to process through payroll.

Wsb5tails

Dazed_and_C0nfused said:

Was this a contribution to a defined benefit company pension?

And can you post some details from the HMRC calculation.  Specifically has your basic rate band been increased and if so by how much?

so far HMRC have made the calculation by adding the £25k Pension Contribution to the basic tax band rate so £37700 + £25000 = £62700 at basic rate tax.  That would be fine to arrive at the amount of relief due on the portion of income taxed at 40% i.e £5k x 0.2 = £1k tax refund due.
But that means the tax relief at basic rate on the £25k, which has not been received or credited to the Pension account, simply vanishes into this air.

Wsb5tails

Dazed_and_C0nfused said:

I don't ever recollect a gross contribution with no tax relief being made to a DC scheme though.

They always seem to be where net pay contributions can't be made to a DB scheme, usually as too large to process through payroll.

The Pension scheme only accepts Salary Sacrifice so I assume that saves them the admin on taxation.
Happy to answer any other questions to understand if the basic rate tax relief of £6250 on the £25k is now lost to us

Dazed_and_C0nfused

Wsb5tails said:

Dazed_and_C0nfused said:

Was this a contribution to a defined benefit company pension?

And can you post some details from the HMRC calculation.  Specifically has your basic rate band been increased and if so by how much?

so far HMRC have made the calculation by adding the £25k Pension Contribution to the basic tax band rate so £37700 + £25000 = £62700 at basic rate tax.  That would be fine to arrive at the amount of relief due on the portion of income taxed at 40% i.e £5k x 0.2 = £1k tax refund due.
But that means the tax relief at basic rate on the £25k, which has not been received or credited to the Pension account, simply vanishes into this air.

That means that when calculating your tax liability they have treated it as a RAS contribution.

Which you are convinced it isn't.

Dazed_and_C0nfused

Wsb5tails said:

Dazed_and_C0nfused said:

I don't ever recollect a gross contribution with no tax relief being made to a DC scheme though.

They always seem to be where net pay contributions can't be made to a DB scheme, usually as too large to process through payroll.

The Pension scheme only accepts Salary Sacrifice so I assume that saves them the admin on taxation.
Happy to answer any other questions to understand if the basic rate tax relief of £6250 on the £25k is now lost to us

You do realise that salary sacrifice actually means it's an employer contribution and there is never any tax relief due to the individual from an employer contribution.

If the pension company only accepts employer contributions how have you been able to make a payment yourself?

Albermarle

Dazed_and_C0nfused said:

Wsb5tails said:

Dazed_and_C0nfused said:

I don't ever recollect a gross contribution with no tax relief being made to a DC scheme though.

They always seem to be where net pay contributions can't be made to a DB scheme, usually as too large to process through payroll.

The Pension scheme only accepts Salary Sacrifice so I assume that saves them the admin on taxation.
Happy to answer any other questions to understand if the basic rate tax relief of £6250 on the £25k is now lost to us

You do realise that salary sacrifice actually means it's an employer contribution and there is never any tax relief due to the individual from an employer contribution.

If the pension company only accepts employer contributions how have you been able to make a payment yourself?

It seems that they allowed the personal Payment, but were unable to add basic rate tax relief to it as their system was set up for SS. They informed the OP they just needed to contact HMRC to claim the basic rate relief, but they are struggling with this. 

Wsb5tails

Dazed_and_C0nfused said:

Wsb5tails said:

Dazed_and_C0nfused said:

Was this a contribution to a defined benefit company pension?

And can you post some details from the HMRC calculation.  Specifically has your basic rate band been increased and if so by how much?

so far HMRC have made the calculation by adding the £25k Pension Contribution to the basic tax band rate so £37700 + £25000 = £62700 at basic rate tax.  That would be fine to arrive at the amount of relief due on the portion of income taxed at 40% i.e £5k x 0.2 = £1k tax refund due.
But that means the tax relief at basic rate on the £25k, which has not been received or credited to the Pension account, simply vanishes into this air.

That means that when calculating your tax liability they have treated it as a RAS contribution.

Which you are convinced it isn't.

Yes, the £25k was sent by Cq with a form to the Pension Co from savings.  The form states quite clearly, send the gross amount you wish to add to your Pension, no tax relief will be added on your behalf, you will need to make a claim to HMRC for the relief at the appropriate rate.  I have checked the Pension statement and only the £25k payment I made has been recorded.

Wsb5tails

Dazed_and_C0nfused said:

Wsb5tails said:

Dazed_and_C0nfused said:

I don't ever recollect a gross contribution with no tax relief being made to a DC scheme though.

They always seem to be where net pay contributions can't be made to a DB scheme, usually as too large to process through payroll.

The Pension scheme only accepts Salary Sacrifice so I assume that saves them the admin on taxation.
Happy to answer any other questions to understand if the basic rate tax relief of £6250 on the £25k is now lost to us

You do realise that salary sacrifice actually means it's an employer contribution and there is never any tax relief due to the individual from an employer contribution.

If the pension company only accepts employer contributions how have you been able to make a payment yourself?

As Albermarle said, they had no problem accepting a payment directly from us and had forms to complete this.  In hindsight I wish I hadn't bothered but it seemed like a wise thing to do at the time, low interest rates on savings, ISAs full, using up unused annual allowance etc.

I have requested a statement from the Pension Co as evidence that no relief has been credited, already sent a copy of the letter stating a gross payment of £25k had been received by them to HMRC. 

I just need to 1, get hold of someone in HMRC in the first place 2, make them understand what I'm talking about as its clearly a peculiar one.

I've looked through filling out a Self Assessment form but I don't even think that would demonstrate the situation in the way required.