Tax relief on UK pension

I'm still confused about how to report UK pension contributions on a US tax return, and have come across another question.

When contributing to a UK group personal pension plan (defined contribution), your salary is first taxed, then you put money into the pension, and then HMRC tops this up by 20%.  So, when reporting the amount of foreign tax paid, should it be tax shown on payslip minus the 20% relief added to pension plan.  Or, should it be reported as tax on payslip, with the 20% tax relief counted as income?

(IMHO) Have an in depth read of the treaty as to the treatment of your particular defined contribution pension (opinions vary), and then decide how you want to be taxed in the distribution phase.

Seconded (theOAP's answer)

The opportunity is to arrange for (mostly) tax free pensions to be paid to you eventually in the US, assuming you retire in the US.

Thanks, I have gotten the general gist of the benefits of claiming the treaty exclusion for pension contributions (if applicable).  It's more how to report gross income and tax paid when the government tops up your pension.  I'm just not sure whether it is erroneous to claim that you have paid £100 in tax, when the government gave you £20 of it back in your pension pot.  On the other hand, adding the £20 to your gross income seems a bit unfair as it pushes your overall income up, and potentially pushes you into a higher tax bracket.

From the previous thread you started: this is your DPs pension, and you have an accountant doing the tax return?

I'm trying to read between the lines since there are variations of defined contribution pensions. Is the 20% a UK Government contribution to the pension, as well as DPs contributions and the employers contributions? Or, is the 20% the amount of tax you think HMRC didn't tax DPs contributions because he is (?) in the 20% tax band?

Your accountant will be able to decipher DPs P60, which will be issued after 5 April, as to gross income, taxed income, untaxed income (including DPs pension contributions?), and amount of tax withheld on taxed income.

If DP is resident in the UK on April 15, he will have until June 15 to file the return, or the accountant may request a longer extension.

Make sure your accountant understands how the use of treaty benefits, if exercised, eventually impact on the taxation of the pension (and depending on residence in either country) once DP is drawing the pension.   

Yes, that's me, its DP's pension and an accountant doing the return.  The pension contributions are made post-tax, and then the government tops up the 20%.  DP is actually in the 40% tax bracket, but the extra tax has to be claimed back on the UK tax return.

The accountant has finished the tax return.  They claimed foreign tax credits, (including national insurance contributions which I am sure is wrong).  They didn't mention the employer pension contributions or the the treaty.  DP still owed a small amount of taxes as foreign tax credits didn't cover the amount owed.

Not really sure what to do.  We have paid this firm (based in US but supposedly experts in expat tax) and they seem to have made obvious errors.  Can't afford to pay anyone else to do it, and I'm not sure how to fix the pension issues myself.

I wouldn't worry about it. You've employed them to do a proper job. If the IRS disagree, it's the advisers problem (aside from any additional tax due? I don't know what your contract stipulates). Provided they had ALL the figures and all information, they should pick up any penalties, interest, and costs of refiling, if required. If they haven't filed the form yet then raise your questions; but they're the experts. Do keep a record of any queries you raise.

No major damage done, and next year you can file as you prefer regarding the pension/treaty situation, possibly with another firm if you've lost complete faith in this one. I assume DP has a different firm in the UK to handle the UK returns (if not PAYE).

If you do have a different firm next year, and if they see a major error with what has been filed, they may want to file an ammended return for this one in order to ease going forward. Wait until next year. 

Ok, I guess we'll leave it as it is for now and file with someone else next year.  I think if we file 1116 and invoke the treaty, the tax due would come out the same anyway.  So it's more that the forms aren't filled out accurately rather than that we owe tax.  DP will need to fill out a UK tax return too, but I think we will try and tackle that ourselves - should be a lot simpler.  Thanks for putting my mind at rest.