Contribution Tax Relief

Overview

Omni now stores details of tax relief that has been claimed on net contributions and then has an automatic process to create all the bank transactions (and post them) and create all the records in contribution and contribution split records.

Report on Tax Relief Due

The report of contributions for which tax relief should be claimed looks at the period from the start of the tax year to end of the tax month specified. This should consist mainly of contributions received during the latest tax month but will also include any contributions for previous months for which a tax claim has not been stored. The process is cumulative and relies on the user storing details of each claim as it is made.

There is a column on the report to show whether the contribution relates to a previous month.

There is an option for ‘Annual Claim for Tax Relief or Catch Up’ – this allows you to set the date range for a previous tax year, if you need to make an additional claim covering a different tax year.

The program allows the report to include all previous contributions (even if tax relief has been claimed). It is recommended that the report is run on this basis each month so that a check can be carried out, comparing the total to be claimed to the end of the current month with the total claimed to the end of the previous months plus the new claim. This check should highlight any changes in the database that affect the claim.

Employer contributions are also included but because tax relief is not claimed there is no concept of 'previously claimed' or not. When a report is run excluding previously claimed contributions, only employer contributions paid in the latest tax month are shown. When previously claimed contributions are included, all employer contributions are included for that tax year.

Contributions categorised as ‘Member over 75’ are excluded from the tax relief that is claimed in the report.

Details of tax to reclaim for Scottish and Welsh residents is shown separately. The country of residence is picked up from the Contributions tab on the Menu screen.

Tax Claims Submitted

Omni now stores the overall details for each tax relief claim (i.e. the global monthly claim for the whole SIPP) including the period it relates to, the date the claim was submitted and the total amount. A note can also be stored.

Tax Relief Schedules

Omni also stores details of the individual claims made on behalf of each member within the global amount, including the amount of tax relief claimed for each member.

Storing Second Claim For a Period

The user cannot store a second claim for a period ending on a date that has already been used for a claim.

Allocating Tax Claims Received

When a claim is received, Omni asks for the date that the tax payment was received from the Inland Revenue. It also confirms the total expected and asks for confirmation. It explains what it will do and only allows a user with system rights to proceed (to stop the program being run accidentally by someone not familiar with the workings).

The program carries out the following process:

1. stores the date received with the global tax reclaim records

2. stores the date received in the schedule of tax relief received per member)

3. creates the bank transaction records in the ‘main’ bank account. If there is more than one bank account for a scheme then it is important that the ‘main account’ flag is set. For each bank transaction a comment of 'AutoGenerated - for cont of dd/mm/yyyy' is added.

4. all these bank transactions are imported automatically

5. creates the contribution split record for the tax relief as part of the original contribution record

The tax relief can go into a different bank account from the original contribution if the 'main account' has been changed by the time that the tax relief is allocated.

The program sends to a spreadsheet the amounts allocated and the amounts that could not be allocated (usually because the contribution has been deleted since the claim was made).

Bank Transactions

The process uses a new bank transaction category of ‘Cont Tax Relief’, which is not available when records are entered manually. If a tax relief receipt is entered manually then the current approach continues i.e. it is entered as a contribution and imported as a separate record from the original net contribution record.

The automatically generated bank transaction record also has a comment explaining it was automatically generated.

Deleting Claim Details

Before the receipt of a tax claim has been processed, the details of a claim can be deleted if the claim submission needs to be re-run. It is recommended that the claim details are not stored until the claim is physically posted to the Revenue. After that time the claim should not be deleted as it is a record of what was actually submitted even though it might be amended by adjustments in subsequent claims. If a claim is deleted from the database after it has submitted there is a danger that it cannot be re-created due to changes that have been made to the database in the meantime.

Reversing Tax Relief Bank Transactions

Once the receipt of a tax claim has been processed, the process can be reversed. All of the records created are deleted and the amendments to records are reversed. The claim itself can then be deleted if necessary.

Once again, this should be used with great care. If the database has been amended between the processing of the tax receipt and the reversal (perhaps some bank transactions deleted) then the position may be confused.

Storing Tax Relief

There is no automatic check on the amount of tax received. However, there is less need for acheck if the tax record is generated automatically. If a tax relief record is added manually as a split of an existing contribution, the program checks the tax as a % of net contribution for that member.

Deleting Contributions

Contributions can be deleted in the Contributions and Funds screen. If a contribution record includes tax relief then the related tax relief bank transaction will also be deleted. This may cause issues if the Tax Receipt is reversed and re processed.

Refunds of Tax on Contributions Paid In Error

It is possible that a contribution is paid, tax relief is claimed and received and then it is discovered that the contribution was paid in error (perhaps exceeds the limit). It is assumed that, when the contribution error is discovered, the tax relief that is not now due is deducted from the member's bank account and credited to a suspense account. When the adjusted tax relief is received there is no different process to do - the tax just comes from 2 sources, part from Revenue as normal and part from suspense account.

Investment Valuations

Amounts of tax relief that have not been received are added as debtors to valuations, whether or not the tax relief has actually been claimed. Once the claim has been received and the tax relief allocated, these debtors will not appear. All contributions received before 6th April 2004 (this can be changed by the master user) are ignored because they will not have had tax relief claimed automatically.

Tax relief that will be claimed on contributions received after the specified valuation date are ignored.

Splitting The Fund

When the tax relief transactions are generated automatically, the allocation of the fund value will include transactions for tax relief that is due but has not been received. It is therefore important that the fund value also includes debtors for the tax relief not yet received.

When determining whether a tax relief transaction is included in the fund split, the key date is the date that the contribution was paid – not the date the tax relief is received.

When determining the date to be used for the tax relief transaction, the key date is the date that the tax relief was received. If the tax relief was received during the fund split period then the transaction date is the date it was received. If it was received after the end of the fund split period then the transaction date is the final date of that period. If the tax relief has not been received when the fund split is run, then the transaction date is the final date of that period. The fact that a fund split is run when tax relief is outstanding will affect the split of the fund but the effect should only be marginal – the tax relief (which will usually be a small percentage of the fund) will receive investment return a few weeks early.

If a contribution is entered as 'Self employed' or 'Employee' and tax has not been received but one of the split records has not been identified as 'Net' or 'Tax', then the program assumes that the split should be a net contribution and will allow for a tax debtor for it. This will only usually arise if the contribution relates to more than one member (if it relates to one member then the split record is generated automatically when the contribution is imported.

Tax Rates

The tax rate used to calculate the tax relief to be claimed is stored in the 'Other, TaxRates and Base Rates' screen. The program automatically picks up the latest tax rate if the rate changes for a new tax year. When producing an investment valuation, if there is more than 1 amount of tax relief outstanding (claimed or not yet claimed), the program will use the appropriate tax rate based on the date of payment - different tax rates can be used for different contributions.

It is also used when checking the tax relief on closing the contribution split window.

Entering Contributions - Automatic Creation of Split Records

When importing a contribution, if a member was selected when the bank transaction was entered, then the contribution split record is created automatically. If no member was selected then it is assumed that the contribution is to be split between more than one member and so the user will have to enter the split details individually.

Contributions can only be imported using the 'Contributions and Funds' window - they cannot be imported from the 'Add Details' button on the Bank Transactions window.

The Gross/Net/Tax relief field will automatically be completed for SIPPs, depending on the type of contribution.