Guidance

Pension schemes relief at source for Scottish Income Tax newsletter - December 2017

Published 18 December 2017

1. Introduction

In May 2017 we published the Pension schemes Scottish rate of Income Tax newsletter to update pension scheme administrators about relief at source for Scottish Income Tax and changes to the process for submitting the annual return of individual information.

We gave more information about how we’ll tell pension scheme administrators the residency status of their members for relief at source.

This newsletter provides a summary of our work and includes additional information to help you prepare for April 2018.

2. Scottish Budget

As you may know, new Scottish Income Tax rates and thresholds were announced in the Scottish Budget on 14 December 2017.

Her Majesty’s Government and HM Revenue and Customs (HMRC) will be working closely with the Scottish Government and with pension providers on the implications of that change for pension tax relief, and to clarify how the mechanisms for providing relief will operate in respect of Scottish pension savers.

3. Notification of residency status report

3.1 When we’ll send you the report

As we explained in the Pension schemes Scottish rate of Income Tax newsletter, we aim to tell you the residency tax status of your scheme members for the first time in January 2018, so that you can apply the correct rate of relief at source to your scheme members in the tax year 2018 to 2019.

From 2018 onwards we’ll tell you this information in January each year.

The report we send you is based on data from the last annual return of individual information you submitted for the previous tax year (deadline 5 July of current tax year).

for example, the report that we’ll send you in January 2018 is based on the information you submitted on your annual return of individual information for the tax year 2016 to 2017.

3.2 How we’ll send you the report

To receive your notification of residency status report, you must be enrolled on the secure data exchange service (SDES). We’ll automatically migrate those pension scheme administrators who currently use secure electronic transfer (SET) to SDES.

If you haven’t enrolled onto SDES yet, you can find information about how to do this in Pension schemes newsletter 88.

If you haven’t already enrolled for SDES, or didn’t submit your annual return of individual information by 30 September 2017, we can’t guarantee that you’ll receive a notification of residency status report this January.

If you don’t receive a notification of residency status report you can use the residency status look up service or default to the UK basic rate of tax.

It’s really important that all pension scheme administrators enrol onto SDES to receive your notification of residency status report so that you can give your members the right rate of relief at source on their pension contributions.

From April 2018 you’ll also be able to submit your annual return of individual information through SDES.

If you outsource relief at source work to a third party or practitioner, they’ll also need to enrol for SDES to receive the notification of residency status report and submit the annual return of individual information.

3.3 What we’ll include on the report

As we explained in Pension schemes newsletter 91, we’ll tell you the residency tax status of each of your scheme members on the notification of residency status report by adding an additional field to the original information you submitted showing:

• an S for Scottish tax status
• a U for unmatched individuals
• a blank field for rest of the UK

We’ll also add a field to tell you that the National Insurance number you submitted for an individual is incorrect and we’ll give you the correct one.

We’ll include the incorrect National Insurance number you submitted so that you can identify the scheme member from your original submission and correct the National Insurance number on your records.

The information we send you on the notification of residency status report will mirror the information you submitted in your annual return of individual information and will be in our standard format.

You can find out more about this in the electronic flat text file specifications.

3.4 When you can download the report

We’ll email you to tell you that the file is available for you to download and you’ll have 6 days to download this (144 hours starting from when we make the file available to you for download). We’ll send you a reminder by email too.

If you don’t download the file in time, you should contact us. We’ll provide guidance on how to do this when we update our GOV.UK content in January 2018.

If you don’t receive a report, for example if you’re a new relief at source scheme administrator, you’ll be able to use the residency status look up service to check the residency tax status for single or multiple members.

4. Residency status look up service

We’re developing our residency status look up service so that you can check the status of relief at source members not included on your notification of residency status report.

You’ll be able to check the residency tax status of single members or multiple members using the residency status look up service and this will be available on GOV.UK early in the new year.

We’ll let you know when this is available through our pension schemes newsletters.

You’ll be able to access the residency status look up service either from GOV.UK or using an application programming interface (API). If you use an API, you can develop your own interface or use third party software.

4.1 How to use the residency status look up service

To use the residency status look up service you’ll have to sign into your organisation’s Government Gateway account. After signing in you’ll be able to choose whether to look up a single member or carry out a bulk search.

You’ll need to know each scheme member’s:

• first and last name
• date of birth
• National Insurance number

If a member updates their address details with HMRC, there can be a delay to their residency status updating in the service.

For a single member search, you’ll need to enter your member’s details one at a time and submit these to receive the search result.

For a bulk search, you’ll need to create a specific file to upload. If you have more than one bulk file to upload onto the service, you’ll have to wait until you get the residency status results for each bulk file before uploading the next bulk file.

We’ll provide more information about this in future newsletters.

4.2 Results of residency status look up

For every search that you carry out for each member, their status will show as one of the following:

• Scotland
• England, Northern Ireland or Wales
• member not found

If a residency status is given and you use this to give relief at source on your member’s first contribution, you must use this for the whole of the tax year.

If the member’s status is returned as ‘member not found’ you’ll need to check the details you’ve used with your member.

If you think all the information you have is correct, your scheme member will need to contact HMRC to check their National Insurance details are correct.

If you use the look up service to find the residency status of your member between April and December, you’ll see their current tax year’s residency status for relief at source.

If you use the look up service between January and April each year we’ll also give you the residency status of your member for the next tax year.

You’ll be able to use this for the next tax year, to give the correct rate of relief at source to members who have joined your scheme since we sent you the notification of residency status report in January.

At this point, the current year residency status may be different from the one you have been applying for your member for the current tax year.

However, you should continue to use the rate you’ve been applying for this member because we will reconcile this at the end of the tax year so that they get relief at source at the correct rate.

You may need to take further action for some members.

For members who don’t have a National Insurance number but who are over 16 years old, you’ll need to ask the member to contact HMRC.

For members who are under 16 years old and don’t have a National Insurance number, you’ll need to treat the residency status as ‘England, Northern Ireland or Wales’.

If you know that a member is deceased you’ll need to contact HMRC.

5. How to apply relief at source rate for the whole tax year

You must apply the same tax rate for a member for the whole of a tax year, even if their status has changed since you received your notification of residency status report or you last used the residency status look up service to check their status.

If a new member joins your scheme and you’re unable to look up their status before you apply tax relief at source to their first contribution, you must default their residency status to rest of UK and maintain this rate for the whole tax year.

If you didn’t receive a notification of residency status report and didn’t look up the residency status of your member, you must also default their residency status to rest of UK.

If there is a shortfall or excess of relief at source at the end of the tax year, we’ll collect or repay this directly to the member.

6. How to submit your annual return of individual information to HMRC

From April 2018 you’ll be able to submit your annual returns of individual information using SDES.

We recommend that you use SDES to do this because it’s secure, free and easy to use. We’ll provide guidance on how to use the service to upload a file in future pension schemes newsletters.

As we explained in Pension schemes newsletter 93, you’ll no longer be able to submit your annual return of individual information by paper from April 2018.

You’ll still be able to submit your annual return of individual information by email, USB, CD or DVD until April 2019 but you’ll have to submit this in a structured format. This will improve the flow of data between HMRC and pension scheme administrators.

We’ll amend the technical specifications to explain how you should structure annual returns of individual information that you submit from April 2018 and we’ll tell you when we’ve published this information in a future pension schemes newsletter.

From April 2019 you’ll only be able to submit your annual return of individual information electronically through SDES.

We’ll perform data validation checks on the information you supply on your annual return of individual information. If mandatory information is missing or doesn’t meet the required data standards, as set out in the technical specifications, we’ll be unable to process your return.

To help you get it right, we’ll tell you about the errors you have made straight away and we’ll give you more detail about this process in a future pension schemes newsletter.

If we’re unable to match a member, we’ll be unable to provide a residency status and you’ll have the option of using the residency status look up service once you’ve got the member’s correct details or default to the rest of UK basic rate of tax for the tax year.

7. Relief at source draft regulations

As we explained in Pension schemes newsletter 93 we’ve published the draft legislation: The Registered Pension Schemes (Relief at Source)(Amendment) Regulations 2018 for a short consultation.

You should send any comments you have on these draft regulations by email to pensions.policy@hmrc.gsi.gov.uk by 31 December 2017.