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Large one-off pension contributions by limited company

I have a small limited company client who engaged in a particular transaction in the financial year just passed. The company sold its commercial property to a pension fund (director's SIPP) at market value. To fund the purchase of the property, the fund obtained a bank loan and also a one-off contribution to the fund from the limited company.

Will the contribution:

(a)   be disclosed as an exceptional item in the P&L

(b)   be deductible for corporation tax purposes

I am assuming the "wholly and exclusively" rule applies which may mean the contribution (c£70k) is disallowed?

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A SIPP is just another personal pension plan and £70k is not exceptional.  (assuming that the company has some income, profits and assets and it is a genuine business there is little HMRC can do). 

I have seen people get nervous about this where perhaps the director/shreholder is approaching retirement age but I have never seen HMRC have any appetite to question it.

If you think about it HMRC will never question a payment of salary or bonus (of course it is not in their interest to do so) and pension payments are just a form of employee remuneration.

Are you nervous because its a SIPP or are you nervous because its £70k?

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nervous..............

Probably a bit of both! I know this type of arrangement is common in small limited companies and utilises pension cash well, but is it really for the benefit of trade? I suppose so given that a company debt (bank loan) has been repaid, but the final benefit is for the director's personal circumstances? Perhaps I am attaching too much significance to the fact that it's the director's SIPP.

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