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Published on 6 April 2023

Finance Bill briefing: Clause 25: Relief relating to net pay arrangements

Submission: Finance Bill briefing: Clause 25:  Relief relating to net pay arrangements. image of a pension pot

We broadly welcome that clause 25 introduces ‘top-up payments’ for low earners contributing to net pay pension schemes who currently miss out on a government pension savings incentive. However, we are very concerned about anticipated low take-up of the payments by the population and about how these payments will be implemented.

We have therefore produced a briefing for MPs as part of the Finance Bill debates. This briefing seeks clarification of a number of points relating to the proposed legislation, and proposes a number of amendments:

Ability to challenge/claim a payment: The legislation should be amended to oblige HMRC to provide calculations for these payments. Also, individuals should be permitted to challenge the amount paid, or to claim a payment if HMRC do not make one.

Data to be used by HMRC to ascertain total income: The government should clarify how HMRC will ascertain an individual's total income for the relevant tax year in order to calculate the appropriate amount to pay.

Claw back if HMRC’s calculation is incorrect: The legislation should state that HMRC cannot claw back a payment if it is found to be excessive.

Treatment of the payments: We would prefer the payments to be treated as tax refunds, rather than as taxable employed earnings. This would put net pay contributors in a more comparable position to those saving into relief at source schemes and avoid some odd circularity issues, such as amendment of Self Assessment tax returns for the relevant tax year.

HMRC notification to DWP for universal credit claimants: HMRC should be obliged to notify DWP of payments made to universal credit claimants.

Implementation/backdating: Initial payments should be backdated to 2023/24 (rather than starting from 2024/25 as currently proposed).

Awareness: The government must collaborate on a publicity campaign with the pensions industry, employers, payroll industry and third sector representatives so that low earners are aware of how to obtain their payment and to minimise the risk of fraudulent/scam activity.

The full briefing can be downloaded here

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