Share this content
0
2
1034

Employer Pension Contribution

A client who operates an owner-managed limited company intends to retire in a few months.

He is planning to make an employer pension contribution to his personal pension of £100k before the company ceases in order to obtain Corporation Tax relief.  He has over £50k pension annual allowance to be carried forward from the previous 3 years & has made no contributions in the current tax year, so this should not generate a tax charge.

Once the company ceases trading, the client intends to commence taking his pension & receive his 25% tax free lump sum.  Would this be frowned upon by HMRC - i.e. a large contribution receiving tax relief is then partially taken out in a tax free environment within the same tax year? 

I haven't been able to find anything from HMRC that states there would be a problem, but thought I'd ask to see if anyone knows of HMRC's stance on this matter.

Replies

Please login or register to join the discussion.

avatar
11th May 2012 15:02

No

HMRC don't really have a choice, as it can be done. I have several client's who have done this with no problems, but this has been done in line advise given by their IFA. 

Thanks (0)

Wholly and exclusively

HMRC can argue in these circumstances that the payment isn't wholly and exclusively for the purposes of the company's trade (See BIM37740).  I'd be surprised though for a £100K payment, unless it's large in relation to the company's annual profitability.

Thanks (0)