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Section 193(4) Finance Act 2004

There may be instances where insufficient relief has been given through the net pay arrangement because:

• the amount of relievable pension contributions paid by a member to one or more pension schemes operating the net pay arrangement in a tax year is more than the employment income they receive from the sponsoring employer(s) for the tax year
• it is not possible for the sponsoring employer or employers to deduct the whole amount of the contribution from the individual鈥檚 employment income.

In these circumstances a member may make a claim to obtain the balance of tax relief available on the contribution, generally via the Self-Assessment system.

Example

Roger earns a basic gross salary of 拢24,000 per year and makes a monthly contribution of 10% of these earnings into his employer鈥檚 pension scheme via the net pay arrangement. He received a bonus of 拢2,000 at Christmas and just before his final month鈥檚 salary in the tax year is due he decides that the 拢2,000 should be paid into the scheme.

As Roger鈥檚 final month鈥檚 gross salary is 拢2,000, and the total monthly contribution will be 拢2,200, it will not be possible for the net pay arrangement to give him full relief. In these circumstances he can make a claim for the outstanding excess relief to be paid to him.