Annual allowance

Question 1

Explain the process for calculating how tax relief will be due for large employer contributions

Answer 1

Does the contribution exceed 210% of conts in previous period?

Is the relevant excess £500k or more?

Where the excess is more than 110% of cont in previous period it is spread

£500-1m = 2 yrs
£1m-2m = 3 yrs
£2m + = 4yrs

Question 2

Explain Net Pay

Answer 2

Net pay only applies to Occ PS, this is a gross from gross method. ER deducts gross cont from gross PAYE - e.g NHS

Question 3

Explain Relief at Source

Answer 3

Individual contributions are made net of BRT from net pay.

Additional relief via SA or tax code adjustment

Question 4

What events would trigger MPAA - 8

Answer 4

1. UFPLS
2. Income from FAD
3. Flexible Annuity
4. Breach of max GAD via Capped DD
5. Stand alone lump sum with Prim Prot and TFC
6. Scheme pension from occ MP with less than 12 members
7. Conversion of Flexible DD to FAD on 06/04/15

Question 5

Does MPPA apply in the full tax year or from trigger point?

Answer 5

Trigger point

Question 6

When did the pre/post alignment period happen

Answer 6

Pre alignment was 6/4/15 to 8/7/15

Post alignment was 09/07/15 to 5/4/16

Question 7

How long do you have to notify scheme administrators when MPAA has been triggered?

Answer 7

91 days of receiving confirmation or 91 days of joining the scheme if later

Question 8

What is threshold income?

Answer 8

All gross income less gross pension contributions - net pay and RAS

If this figure exceeds £110k then the adjusted income needs to be assessed.

Question 9

What is adjusted income?

Answer 9

Threshold income plus ALL pension contributions

Anything over £150k will result in a tapered annual allowance

Question 10

DB PIA - what is the multiple when calculated pension input?

Answer 10

16 times pension accrued plus PCLS if paid in addition

Question 11

What is the tax charge if the AA is exceeded?

Answer 11

20%, 40% or 45% depending on the bracket it falls in when added to other income. Known as the ‘appropriate rate’.

Question 12

Is the AA tax charge based on income or NAI

Answer 12

NAI - the higher of the two

Question 13

How is the AA tax charge paid?

Answer 13

1. Via Self Assessment
2. Or if the charge is more than £2k and PIA exceeds £40k the member can elect for scheme to pay.

Deadline for option 2 is 31 July the year after the assessment.