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Pension annual allowance charge

Scottish taxpayers and the pension annual allowance charge

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Not sure if this is the right place to post this. I have a Scottish taxpayer with income of £122948 before personal allowances. Personal allowance is abated down to £376 giving taxable income of £122572. She has pension annual allowance excess of £6924 so I would expect additional tax of £2838.84 ( 41%)

IRIS comes up with £2885.14 and have run this through the HMRC checker which gets the same figure. I thought that the charge was not increased by losing the remaining personal allowance and even if it was the HMRC figure would be too low.

Have I missed something obvious? if I change her to a UK take payer the charge comes out at £6924 @ 40%

Any help appreciated.

Replies (5)

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Replying to MJShone:
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By gogarloch
18th Sep 2019 08:56

Thanks, the bands are not changed for this tax payer as the pension is a NHS superannuation scheme so no relief at source. Working backwards I can see that part of the pension excess tax is being charged at 46% under Scottish rules but I don't see how.

Phone call to HMRC technical team drew a blank as well. I will ask for a written explanation. I can't overwrite the software calculation.

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Lone Wolf
By Lone_Wolf
18th Sep 2019 09:46

I've had a similar issue. A taxpayer who should have to pay the charge at 21% is being charged at 41%. We use CCH software.

I raised it with them and they came back with the "We use the HMRC calculation" line, so I'm going to have to write to HMRC about it.

Like you, when I changed them to a "Rest of UK" taxpayer, the charge calculated at the correct 20%, so there's obviously something in their calculation not picking up the differing Scottish rates.

I blame the bloody SNP rather than HMRC for this one. Not sure which organisation is more incompetent.

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Replying to Lone_Wolf:
By Duggimon
18th Sep 2019 15:09

You can blame the SNP for it if you like but the fact of the matter is that the HMRC calculation is wrong for Scottish taxpayers in multiple situations.

There are rules set, which are needlessly complicated but which can be followed. The Scottish Government is to blame for the complexity. The blame lies firmly with HMRC for failing to implement them in their calculations though, I can program a calculator that works for Scottish taxpayers and I'm just one accountant making a spreadsheet. They're a whole government department responsible for all of the money, it's a disgusting shambles.

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Replying to Duggimon:
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By gogarloch
18th Sep 2019 15:17

The system is unnecessarily complex and we have fun explaining it to clients, especially when it doesn't apply to all income.

Why HMRC can get it so wrong is shocking. We have written to HMRC to request an explanation of the charge for Scottish taxpayers an I assume it will become another exclusion case. I will leave feedback if they get round to replying. I have also put a question on the agents forum to see if HMRC respond there.

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