Wed, 2 Apr 2008

Company forced to file early to gain 22% relief

A UK company was advised to send out its March pension contributions three weeks early so its employees can benefit from the 22% rate of tax relief before it drops to 20% on 6 April.

Electronics packaging solutions provider Schroff UK has made plans to pay its employee pension contributions several weeks ahead of the due date following advice from its financial adviser, which was supported by pensions provider Scottish Equitable.

But Paula Lord, Schroff’s management accountant, said that employees should have been entitled to the 22% relief regardless of when it was processed: ‘It’s not that big an issue to us, but for smaller companies with less cash flow I am wondering how that would work for them. At the end of the day, employees are paying 22% tax, and then we as the employer pay the net, so employees should be entitled to 22%, not 20%. That’s theft in my mind.’

Simon Parsons, director of payment benefits and compliance with payroll service provider Ceridian and a Payroll World columnist, said that Schroff was not alone in navigating this issue because the ‘answer is unclear’ he said.

But employers are ‘effectively acting as HMRC’s collection agent’ and so it is worth pursuing the issue with them, he said.