Contractor Among Contractors
Banned
If the company doesnt have any income in a particular year wouldn't company pension contributions be pointless for tax savings. It will be offset from the corp tax, but if no income, no profit (in fact there will be loss), no corp tax, no relief.
I guess if you want to draw down money from LTD that is OK.
However wouldn't it be better to be on £52k salary with £40k salary sacrifice? This way you pay a bit of NICs, but get tax refund on the full £40k (incl. the tax free £12k). Or I am wrong?
Nervous Newbie
People here are always saying speak to your accountant.
Well, my accountant said I shouldn't be drawing a salary if the company isn't trading i.e. company has no revenue due to me being out of contract.
I'll be interested to see what the comments in this thread have to say about it.
It depends on whether the company is solvent and can afford the salary. If it is, and it can, then it should (assuming no other salary).
Sounds like you need a new accountant. Or you need to provide the relevant details that he used to provide that advice.
Paying a salary makes the company trading in any case. So what makes you think it’s not trading? Just having no revenue right now is not the same as “not trading”. For a start I only invoice every 4 weeks and that doesn’t make me not trading for the 3 intervening weeks.
Last edited by Lance; 1st December 2020 at 18:32.
See You Next Tuesday
Nervous Newbie
There are no unusual circumstances. The company had ample retained profit to pay salary and dividends, but the accountant advised most expenses are only allowed if they relate to trading, and the company stops trading from the point it stops generating income.
They also advised that an employer pension contribution could not exceed operating profit in the year the contribution was made, otherwise the excess would be disallowed for corporation tax.
So if the OP was using the same accountant as myself, they would presumably be advised that they should not take a salary, would not be able to make employer pension contributions (as there would be no operating profit), but could continue taking dividends (which come from retained profit).