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RH 5: Calculating amounts of tax for retirement scheme contribution
or “How to work out the tax on your retirement scheme contribution”
You could also call this:

“How to calculate tax owed when retirement scheme contributions are undertaxed”

If someone who puts money into a retirement scheme (called a retirement scheme contributor) or the retirement savings scheme itself doesn’t take out the right amount of tax from a contribution, this is how you work out the tax that should have been taken:

You use a special math formula. First, you take the tax rate and divide it by 1 minus the tax rate. Then you multiply this by the amount of money put into the scheme (not counting any tax). Finally, you subtract any tax that’s already been paid.

The tax rate you use in this formula is found in a different part of the law called schedule 1, part D, clause 7. This tells you the right rate of Retirement Scheme Contribution Tax (RSCT) for the person.

When you’re looking at how much was put into the scheme, you only count the actual contribution, not any tax that might have been included.

Remember, if any tax has already been paid on this contribution, you take that away at the end of your calculation.

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or “Tax on selling residential property for overseas owners”
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Part R General collection rules
Withholding tax on retirement scheme contributions: Calculating amounts of tax

RH 6Calculating amounts of tax on failure to withhold

  1. This section applies when a retirement scheme contributor or retirement savings scheme does not withhold an amount of tax for a retirement scheme contribution under section RH 2(4).

  2. The amount is calculated using the formula—

    (tax rate ÷ (1 − tax rate) × contribution to scheme) − tax already paid.

    Where:

    • In the formula,—

    • tax rate is the rate of RSCT for the person set out in schedule 1, part D, clause 7 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits):
      1. contribution to scheme is the amount of the retirement scheme contribution received by the retirement savings scheme excluding the amount of tax:
        1. tax already paid is any amount of tax for the contribution that has already been paid.

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          Notes
          • Section RH 6: inserted, on , by section 545 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).