Directors Pension?

[mackenzie99d]

Hi All,

Has anyone had experience with making Directors Pension payments direct from a ltd company account as an expense? If hypothetically my ltd company made £200k in a tax year and I hadn't made any contributions into a pension for 4 years. Would I be able to use my carry forward allowance of £50+50+50+40k = £190k and pay £190k (anything I don't pay myself in salary) into a SIPP in one go? I have a pension that is a registered scheme.

I've seen this from the HMRC website which suggests that pesions are a legitimate allowable expense, but it doesn't state a maximum contribution
BIM46035 - Specific deductions: pension schemes: wholly & exclusively: controlling directors & shareholders

Would the tax man have an issue with such a large payment?

Thanks

Also with regards to the part about payments made 'wholly and exclusively for the purposes of the trade'- if I'm just a contractor and have no other employees,
and everything my ltd company is paid is just for my time then wouldn't that count as wholly and exclusively?

[TheFaQQer]

As long as the pension scheme was in operation for the previous years, then there wouldn't be a problem with paying in. If it wasn't, you can't use the previous allowances.

[Maslins]

As long as the pension scheme was in operation for the previous years, then there wouldn't be a problem with paying in. If it wasn't, you can't use the previous allowances.

That was my thoughts from previous discussions with IFAs. You can't set up a brand new scheme today where there wasn't one before and use previous year's allowances.

Re it being allowable for CT purposes, never seen anything like that challenged, but then what you're proposing does seem at the extreme end. Some would say if the company made £200k profit off your work and you're the sole director/shareholder, of course you can remunerate yourself with £190k of it if you so wish. That being all pension is a personal choice, and I believe not one HMRC could challenge.

Given the amount, I would double check with an IFA first re using previous year's amounts. Worth spending £500-1k for a bit of advice and to check that than risk £150k of the contribution being deemed above the annual threshold.

[mackenzie99d]

Thanks for the replies guys! Yes I've had a pension scheme for many years although
recently I transferred it into a SIPP but I don't see that being an issue? I've got an IFA and my accountant looking at it at the moment but yet to get a definite yes or no
so was starting to get a bit worried as it's getting close to the end of the tax year so
asking HMRC might be difficult..

[Jessica@WhiteFieldTax]

Concur with Maslins and FaQQer

[Boo]

That was my thoughts from previous discussions with IFAs. You can't set up a brand new scheme today where there wasn't one before and use previous year's allowances.

Can you use an old scheme from a previous employer ? Are they required to accept payments from you whoever you are working for ?

If not then I second the OPs question in post#4 : If I transfer an existing scheme into a new SIPP then does it count as having existed for the years before it commenced for the purposes of carry over ?

Boo

[Jessica@WhiteFieldTax]

Can you use an old scheme from a previous employer ? Are they required to accept payments from you whoever you are working for ?

It would depend on what type of scheme the employer had. If it was final salary type, then no.

If it was a group personal pension then yes, as the policy outlives the employment.

If not then I second the OPs question in post#4 : If I transfer an existing scheme into a new SIPP then does it count as having existed for the years before it commenced for the purposes of carry over ?

Boo

As far as I am aware it doesn't as its a transfer into a new scheme rather than a roll over of an existing scheme, so new scheme, new clock. But pension technical desk of SIPP manager are the guys to put that to.

[mackenzie99d]

Hi Jessica,

I asked my SIPP provider and they said that changing pensions wouldn't affect carry forward allowance. I look on the web and can't find any reference to that . Everyone seems to quote
that you just have to be a member of 'a' registered scheme in the qualifying years and nothing
more than that?

[Jessica@WhiteFieldTax]

Sometimes its difficult to find clarity on these things, especially with the migration away from the old content rich HMRC web site to the new noddy language .gov one.

I'ld suggest you ask SIPP people to email you "for your files" - covers your back.