Income paid gross from SSAS

richallum

About to start taking an income via drawdown for a member of a SSAS. This is administered by Aviva. They've said to the adviser that the income should be paid gross and the client account for it via self assessment. Never come across this before & Aviva struggle to out me through to anyone who can answer why.

Anyone come across this before?

arongunningham

Is it a Suntrust one?

richallum

Yes

Suse1969

Haven't seen that.

We've had to set up a payroll for some though whereby the provider pays gross to the payroll team so that they can sort out the tax and prep P60s etc.

Our current Suntrust ones aren't taking income so can't comment on them in particular.

arongunningham

I've noticed this before, but I can't see/remember why this is the case.

Sorry, i've come close to helping you but fallen at the last hurdle

richallum

Got a very good answer to this from Graham Muir at Talbot & Muir. Thanks Graham

There are ordinarily three options;

1 The SSAS Provider may establish a payroll specifically for the scheme in question and administer the payment of pension (and deduction of income tax) on behalf of the trustees. Many SSAS Providers don’t favour this route as it requires an individual payroll for each individual SSAS which is relatively expensive and, further, payroll administration is a skill set that some SSAS Providers do not possess.

2 Often the trustees will ‘piggy back’ on the employer’s own payroll and make a gross payment to the employer who, in turn, will establish an ‘employee’ (being the pensioner) within their payroll system and deduct income tax and pay the net pension to the member.

3 The trustees could use a payroll service that might be provided by the client’s accountants for example. As with option 2 above, the trustees would send the gross payment to the payroll bureau who would deal with the income tax deductions and make the net payment to the member.

The scheme administrator is required to deduct income tax from the flexi-access drawdown pension under the PAYE regulations. I would not, therefore, agree with AVIVA when they suggest that the client should account for the income tax via self-assessment.

The link to HMRC notes re obligation to deduct tax is here.

Suse1969

I agree to disagree with Aviva. These notes tie in with how our payroll team set up - they have a separate payroll for the scheme pensions for an employer if they run the employer payroll though.