For tax credits - are pension contributions made by a relative into the claimants pension fund, deductible from employment income?
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Thanks A - I would appreciate any other contributions for or against.
Any reason why you don't believe me? What's the basis for an alternative analysis to mine?
Sorry, I wasn't sure whether you were basing that on legislation or gut feeling etc.
I'm a ****ing qualified accountant! I don't say stuff because of "gut feel". Jeez!
And we still await your professional opinion.
Apologies, I really appreciated your comment and help - it's hard to know what people are basing their opinions on without reference to legislation etc and I was looking for some evidence that I could print out and refer to - sorry that I came across as rude.
My professional opinion is that it definitely is not deductible, and I should have continued searching for the answer for longer before I asked for help.
I'll contribute a second no.
To quote the Tax Credits Technical Manual a deduction can be made for
"the amount of any contribution made by the claimant, or in the case of a joint claim, by either or both of the claimants to a registered pension scheme together with the amount of any tax relief due on those contributions"
https://www.gov.uk/hmrc-internal-manuals/tax-credits-technical-manual/tc...
Of course the legislation may say different but I doubt it.
http://www.legislation.gov.uk/uksi/2002/2006/part/2/made
Part 2, Chapter 1 s3(7) c
"(c)any contribution made by the claimant, or in the case of a joint claim, by either or both of the claimants to—"
Do you mean, say, taking over some monthly contributions temporarily? - no, this was a one-off gift.
Would you mind expanding on this? - have you seen it work in an actual claim? the above references seem to say that it has to be paid by the claimant themselves.
Okay. Let, me resurrect the moron thread now I can finally post to it.
Everybody's blindly hanging on the words of "guidance" without thinking about it.
The normal situation is that a person pays their own pension contributions, such that the pension contributions that I have paid equates to my pension contributions.
Now, the question to ask is was the payment that dad made a net or gross payment? Because the only person that can get tax relief at source on the contributions is the person whose contributions they are.
My dad might pay my rent for me, but my landlord still considers me to have paid my rent.
For example, if the contribution paid by dad was £800 net, such that son gets £1,000 added to his pension pot, then son has made an £800 net contribution using dad's money.
In those circumstances son's basic rate band gets extended by £1,000 in relation to the £800 paid by dad, and he gets to deduct £1,000 for his income for tax credits purposes.
That is the basis of my potential yes, and why those who have just said no or who have just quoted the tax credits manual and aid no are wrong. They never did have, and still don't have, enough information on which to form that view.
To be fair to those quoting the guidance, it itself merely quotes the legislation.
Seeing that you could put the matter beyond doubt by gifting money to the individual and the individual pumping same into a pension, the point seems moot, but I note that s188(1) refers to "relievable pension contributions paid", whilst the Regs quoted above refer to a "contribution made by the claimant".
I'm not 100% convinced by your logic.
[FA 2004] ,s 188(1) refers to "relievable pension contributions paid".
Yes, somebody needs to have paid them before they can be relievable. Indeed, s 188(2), which defines "relievable pension contributions" [paid] goes on to refer to contributions paid "by OR ON BEHALF OF the individual".
The Regs [SI 2002/2006] quoted above refer to a[ny] "contribution made by the claimant".
Yes, ie "member's contributions" in FA 2004 parlance, as opposed to "employer's contributions", made by the claimant's employer.
I'm not 100% convinced by your logic.
I am! As you [implicitly] note, it would be ridiculous that dad providing son with the money for son to make the payment should produce a different result than dad making the payment direct to the pension scheme on the son's behalf.
And, after all, I'm a f***ing accountant!
I'd've agreed already if I knew what imported FA2004 parlance into the Tax Credit Regs. Without such a link, the differences you yourself point out underscore the gap in the logic.
So, if I had expense payments taxable as employment income under ITEPA 2003, s 62 or s 72 and arranged with my employer for them to be paid direct to my dad, I could omit them as income for tax credits purposes, because reg 4(b) only includes them to the extent that they've been paid to me?
... if I knew what imported FA 2004 parlance into the Tax Credit Regs...
Reg 2?
Reg 2? Referring to an Act is not the same as importing its parlance (or are you are looking at a different bit of Reg 2 than I am?)
The Reg 4 comparison doesn't (IMHO) withstand too much scrutiny, since there's a contractual obligation between employer and employee. Satisfying such an obligation by paying someone else at the behest of the employee is still satisfying that obligation - still in effect (or do I mean "in law"?) paying the employee.
So because dad paid the pension contribution, the pension scheme's going to be obliged to pay dad some pension you mean? You're only splitting the hairs that suit you.
It seems to me that Reg 3 uses different (more ambiguous imprecise) language to try and arrive at largely the same place at ITA 2007, s 58
And I was referring to the bit in regulation 2 where it takes an expression used in the regulations and says that it means what it says it means in FA 2004. Yes.
Maybe it's the more ambiguous, imprecise language that underlies my uncertainty. (All I said, IIRC, was that I wasn't 100% convinced.... though, without a better showing from you, I tend to side with the advice helpline as to what the language means.)
Anyhow, let's see if we can be more precise between ourselves. Is the expression to which you refer "registered pension scheme"? If so... c'mon, stop that, you're being far too silly: importing one definition from one section does not import the whole Act, or even merely every definition therein.
The dictionary gives a few meanings of "on behalf of". These include: "in the interests of/in support of/for (the benefit/good/sake) of", etc; and "as a representative/spokesperson/in the name of", etc. Annoyingly, I am not clear what the less ambiguous, imprecise language of FA2004 means either. (Though I'm pretty sure it's universally taken simply to mean "for" - the first set of meanings.)
You also need to consider what is meant by a contribution "made" by the claimant; and why was the word "made" chosen, rather than the word "paid", which is how everybody is [simplisticly IMO] interpreting it.
Who is the maker (as opposed to the payer) of the contribution if dad has paid the son's contribution on the son's behalf. And, again. why is the maker of the contribution a different person when dad pays directly, rather than giving son the money to pay the contribution himself.
I'd suggest that the maker of the contribution is the person (employee/employer) whose contribution it is.
You talk as if the contribution would (need to) be made, even if Dad didn't make it.
Perhaps we have read the OP differently?
To be fair, it wasn't entirely unambiguous. Or precise.
I don't think I implied any necessity. It might be that the son wanted to make the contribution but didn't have the funds, and dad provided the funds so that the desired contribution could be made.
Without there being any necessity involved, the question then remains which of them "made" the contribution (and why did the Parliamentary Draftsman choose the word "made" instead of just "paid", if that was the intended meaning)?
'why is the maker of the contribution a different person when dad pays directly, rather than giving son the money to pay himself' - the contribution was disallowed as not 'made by the claimant', but it was acknowledged that they wouldn't get involved in checking people's bank statements to match incomings and outgoings - so giving the son the money just dodges the rule.
I think the legislation may have an assumed 'or on behalf of', but HMRC chooses not to read it like that.
It's not hard to identify the person that makes a contribution to something. (You don't need me to tell you that, if I put my money in the pot, it's me that's making a contribution.)
The Dullard suggests that the legislators used this language deliberately to encompass the "on behalf of" scenario (though if that's what they meant, why didn't they just say so?) It's just as plausible - I'd say more plausible - that they used the "make a contribution" language because (contrary to The Dullard's twisty turny assertions) it's clear and unambiguous.
Dulls does love putting twists and turns on every single word in the legislation. Sometimes very convincingly. On this occasion, less so (I submit). At the least, I find myself less persuaded now than I was earlier in the day. Had it been anyone else suggesting all this, I'd just have poopooed it and moved on. But I enjoy Dulls's contructs. On this occasion, 'twas a large twelve-storey construct with a magnificent entrance hall, carpeting throughout, 24-hour portage, and an enormous sign on the roof, saying "This Is a Large Construct".
Now where did I put my
underpants?
It's not hard to identify the person that makes a contribution to something. (You don't need me to tell you that, if I put my money in the pot, it's me that's making a contribution.)
So I (having the entitlement to put it there) put the money (that I've borrowed from dad) in the pot myself, I'm the maker of the contribution, but if dad (whose got no entitlement to put it there) puts the money in, that makes dad the maker of the contribution?
I disagree. Who does the pension administrator consider made the contribution, in the latter circumstance? If they think that dad is the maker of the contribution, then surely they shouldn't be giving tax relief on it.
If I want to put money into your pension pot, surely I can? In fact, I'd say the Trustees would be remiss not to accept my generous offer. (They'll pay the annual allowance charge for you… I was thinking of being quite generous!)
If they think that dad is the maker of the contribution, then surely they shouldn't be giving tax relief on it.
All you are doing with that comment is highlighting the difference in language (and therefore, apparently, in outcome) between FA2004 and the Tax Credit Regs. We've already noted that difference. This discussion would have died long ago but for that difference. (It would also have died had you found a genuine reason to import the relevant FA2004 provisions into the Regs - we noted that Reg 2 doesn't do it.)
Thanks Dullard and Tax Dragon. That's why I was in 2 minds, the contribution would be relievable for tax purposes if made by a third party - so possibly for tax credits too, but the tax credits legislation seems to specifically block that.
However, if you've made a contribution, what difference should it make how you came by that particular bit of cash.
Tax credits helpline says that it does depend on how the cash reached the fund - if it's made directly from the other person's bank account then it's not deductible for tax credits, but if it's just given to the claimant and they pay the contribution themselves then it is allowable - you couldn't rely on that comment of course, but it seems to square the circle (ie still your contribution v unfairly increasing a claim)
(The contribution was made net).
So HMRC should add - ''We interpret there to be no assumed 'or on behalf of' here, and we deem whoever's bank account was used to make the transfer, to have made the contribution.''
That would clear things up.