RPSM05101320 - Technical Pages: Contributions and tax relief: Member contributions: Methods of claiming tax relief: Relief at source (RAS)

Relief at source (RAS)

Which schemes can use RAS?

A registered pension scheme must operate relief at source (RAS) unless the tax rules specifically provide that it can operate net pay arrangements or it can accept contributions gross from pension scheme members – (see RPSM05101340 to RPSM05101370). Further information on the statutory requirements which must be met to obtain such relief is set out in RPSM05200000.

Which individuals can use RAS?

Any member making a contribution to a registered pension scheme that operates RAS must make that contribution net of basic rate tax. A third party (other than the employer) who makes a contribution on behalf of a member of that scheme may also make that contribution net of basic rate tax. However only a member may claim higher rate tax relief on that third party contribution. In other words, the contribution is treated as if made by the individual who is the member of the scheme.

Points to note on RAS

If a member has relevant UK earnings of less than basic amount of £3600 but is making a contribution of more than the level of their earnings RAS is the only method by which the member can get tax relief on the excess contribution (up to £3600).

If a member is entitled to an age related personal tax allowance their total income for the purposes of section 257(5) and section 257A(5) ICTA 1988 (level of income where age related personal allowance may be reduced) is reduced by the amount of the grossed up contribution paid to a scheme operating RAS.

Relief for contributions made to retirement annuity contracts is not required to be given under the relief at source (RAS) system; it can be given by making a claim. The decision rests with the RAC provider.