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Posted Mon, 11 Mar 2024 09:45:33 GMT by JuneG
Hello, One of our employees wishes to make a £10k lump sum contribution to their pension this month (Mar24). I've been advised that this is the process but I am a little unclear on the tax relief side of things. - The member transfers the money to bank account; - We pay her an additional non-taxable, non- Niable amount of the same value through the payroll; - We deduct this amount as an additional pension contribution (net pay arrangement so tax relief is given); - We pay the pension provider the £10k and the employee receives tax relief through the payroll straight away. If we deduct the pension contribution by the "net pay arrangement" so that tax relief is applied through the payroll, it will result in a large tax refund so I am unsure if we are allowed to do this? I'm also not entirely sure if we are allowed to make a non-taxable, non-niable payment in the first place but I'm guessing this is ok as it won't count as earnings as it comes directly from employee. Are there are pitfalls to doing this or is there another way to pay a lump sum cont with tax relief? Any help would be appreciated. Thanks.
Posted Tue, 12 Mar 2024 10:05:17 GMT by HMRC Admin 8
If the pension contribution is part of a salary sacrifice arrangement (where the employee gives up the right to future remuneration), the salary given up remains the employers money and is not included on the payroll.
This means the employee benefits from tax relieft at the time the salary is given up.
The employer then makes an employer contribution on behalf of the employee into the registered pension scheme.
As there is an exemption in place for this type of pension contribution, there is no reportable benefit to HMRC.
The employer contribution is not reported on payroll:
Workplace pension schemes
If you are not making the payment as part of a salary sacrifice, and you are just paying the employee's contribution on their behalf, the payment would be a taxable benefit. 
Thank you.

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