HMRC has published an update for pension scheme administrators on the Scottish rate of Income Tax for relief at source on contributions to registered pension schemes by Scottish taxpayers. Scottish rate of Income Tax The Scotland Act 2012 introduced the Scottish rate of Income Tax (SRIT), which is expected to be implemented in April 2016. The rate paid by Scottish taxpayers will be calculated by reducing the basic, higher and additional rates of Income Tax by 10 pence in the pound and adding a new Scottish rate set by the Scottish Parliament. A SRIT of 10% would mean no change from the UK rates. However, a SRIT of 9% would mean the rates paid by Scottish taxpayers were lower (19/39/44%- basic/higher/additional rates) and a Scottish rate of 11% would mean they were higher (21/41/45%). HMRC published a Technical Note (PDF 90K) in May 2012 clarifying the scope of the SRIT and how it would interact with other areas of the Income Tax system. This Technical Note confirmed that Scottish taxpayers should receive tax relief on their pension contributions at the Scottish rates. Pension scheme members who are Scottish taxpayers, who pay contributions to their employer’s pension scheme under the net pay arrangement, will automatically receive tax relief on their contributions at the Scottish rates. However, the system for giving relief at source (RAS) will not automatically provide the correct relief for Scottish taxpayers. government has decided that, in order to ensure that, as far as possible, Scottish taxpayers receive the correct amount of relief into their pension pot, RAS will be paid at Scottish rates for Scottish taxpayers. To enable this, the pensions industry may need to change their systems to be able to claim RAS at the Scottish basic rate for any of their scheme members who are Scottish taxpayers. This will mean being able to differentiate between Scottish and rest of the UK taxpayers in their records and make RAS claims at both Scottish basic rate and the basic rate applicable to the rest of the UK. HMRC intends to provide information to pension scheme administrators to allow them to identify which of their members are Scottish taxpayers. The government has acknowledged that the pensions industry is working in a challenging environment at present and therefore has agreed that they can have longer to implement these changes. Currently it is planned that from April 2018 industry should be ready to make RAS claims at the Scottish basic rate. In the meantime, to ensure that pension scheme members who are Scottish taxpayers aren’t disadvantaged, the government has agreed that from April 2016 pension scheme administrators can continue to claim RAS at the UK basic rate of tax for all members and HMRC will identify Scottish taxpayers and make any adjustment (depending on the rate set by the Scottish Government), to the relief given direct with the scheme member. This will be done either through the Self Assessment process or PAYE coding. HMRC would like to thank those who have so far participated in discussions. Over the coming months we will continue to work with the pensions industry to identify any further issues to successful implementation and on the design of a process covering this transitional period. HMRC has been working with the pensions industry through the Pensions Technical Group to identify ways to deliver Scottish basic rate relief through the RAS process. The
Anyone who is interested in being involved in the development of this process should contact Karen Hopton on Telephone: 03000 556936 or email: karen.hopton@hmrc.gsi.gov.uk .
Defined Ambition legislation expected in 2015
25 February 2014
CIPP Policy News Journal
08/04/2015, Page 369 of 521
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