I have recently taken on a client, who uses NEST for its pension scheme.
The previous accountant has been uploading pension contributions to NEST (which were then paid by direct debit) for both employee and employer as I would expect. However, it transpires that the employee contributions have not gone through the payroll, i.e. the company has shouldered the expense of both the employee and employer contributions.
On option is of course resubmitting the whole payroll for nearly 2 years and claiming the shortfall back from the employees, but the employer understandably doesn't want to do that. I therefore think the only option is to treat the employee contributions paid to date as a pecuniary liability and taxing it as such?
Has anyone ever experienced this before? Any thoughts would be appreciated please!
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What is the problem?
The law specifies a minimum total (employer + employee) contribution and a minimum employer contribution, but not a minimum employee contribution. The current figures are 5% and 2% respectively of qualifying earnings. If the employer has paid over (at least) 5% without asking the employees to contribute anything, that's fine.
They may not have paid over enough! This could be the case if they have paid the employee 1%/ 3% contributions net.
Alternatively if they have paid over the whole 2% / 5% gross these these are all just regarded as being employer's contributions.
You will need to check that the scheme has not been set up to claim basic rate tax back on the employee contributions and that the 3% contributed on behalf of the employee is therefore gross, as mentioned above.