Pension contribution relief is capped at wages and profit and leaves out statutory pay #2371

What happens

pension_contributions_relief caps relief at min(employment_income + self_employment_income, contributions). Statutory sick, maternity and paternity pay are not in that cap, although the model taxes them with wages (employment_benefits in taxable_employment_income). A member whose contributions exceed their wages and profit gets less relief than the same amount of wages would give.

Law

• FA 2004 s. 189(2)(a): "relevant UK earnings" means employment income (among others), and relief is limited by them.
• Pensions Tax Manual PTM044100 lists, among relevant UK earnings, "Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP) if paid by the employer and taxable under Section 7(2) ITEPA 2003". It doesn't name statutory paternity pay; check whether the same treatment applies (it is paid and taxed through payroll in the same way).

Fix

Add employment_benefits to the income in the cap. The Hypothesis test added by #2368 (test_statutory_paternity_pay_is_taxed_as_wages) skips recipients whose contributions exceed their wages and profit because of this; drop that condition once fixed. Run a real enhanced-FRS impact: SSP and SMP are in the data.