ESM10033 - off-payroll working legislation: Chapter 10, ITEPA 2003 (from 6 April 2021): basic principles: impact on pensions tax relief

Deemed employers

The off-payroll working rules in Chapter 10, Part 2 ITEPA 2003 do not make the deemed employer responsible for offering or operating private or occupational pension contributions. The tax and NICs legislation will not trigger the obligation to provide a workplace pension. The deemed employer therefore will also not need to operate auto-enrolment for pensions.

The worker’s intermediary

Where the worker’s intermediary contributes to an occupational or personal pension, this may qualify for tax relief. This does not change as a result of Chapter 10, Part 2 ITEPA 2003.

Tax relief on employer pension contributions is given by allowing them to be deducted as a business expense, therefore reducing the employer’s taxable profit. The Pensions Tax Manual PTM043000 sets out further guidance on employer contributions and tax relief.

Tax relief is available to the worker on their contributions. Normally this will be afforded by the:

● employer (the worker’s intermediary) where they take workplace pension contributions out of the person’s pay before deducting tax, or

● pension provider claiming tax relief at 20% and adding it to the pension (relief at source).

Tax relief that is due but has not been relieved at source, can be claimed by the worker in their Self-Assessment tax return.

Insufficient taxable income available for the worker’s intermediary to give tax relief at source

Because the intermediary can offset the amount of tax that was deducted from its fee by the deemed employer against the tax liability on employment income it pays to the worker, situations can arise where the intermediary then is unable to give pension tax relief at source. In this situation, the unused tax relief should be claimed by the worker through their Self-Assessment tax return.