Looking to bring in a property letting company into the pension scheme - primarily to take advantage of the new rules next year, probably via in-specie contributions.
I understood that contributions were allowable for property letting companies, but having looked into it now I'm not so sure. It's that old problem of property income not quite being a trade and not quite being an investment either.
Does anybody have a view on what is allowable and what isn't, and whether anything changes after April?
Neil Wilson
Replies (6)
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Other web sites
I started an independant web site earlier this year about SIPPs, (same rules) after spending 2 years researching and getting conflicting information from many advisors/sources.
It also has a free discussion forum/message board.
The web site is an on going project, but it may be worth your while taking a look.
you can find it at: http://www.thesipps.org.uk
No in specie contributions
The first problem you'll have is that, from 6th April, there can no longer be "bricks and mortar" contributions. Only cash and certain employee securities will be acceptable as contributions.
You are right that property letting companies have always been awkward. Not being trading companies, the acceptability of employer contributions has always been minimal. But that's mainly because of the difficulty of using emoluments from the company to justify the contributions.
ICTA 1988 s.644(5) blocks emoluments of a controlling director of an investment company from being "relevant earnings" for Personal Pension purposes.
Post A Day, employer contributions are no longer linked to emoluments. The contributions are deemed (FA 2004 s.196(3)) to satisfy ICTA s.65 as management expenses of the year when paid (although HMRC may still argue they are excessive in quantum). Rule of thumb there is: if an equivalent sum paid as a bonus would get CT relief, so will a pension contribution.
Ta Neil
Very helpful. And irons out one of the illogicalities in the initial legislation (why s.161(2)only applies to Chapter 3 and not to Chapter 4 I'll never know!).
Mind you, it does make a nonsense of s.195, which seems surplus to requirements if any asset can be contributed at OMV...
Also supports my long-felt view that the new pensions rules are being made up as they go along...
I disagree - but am willing to be corrected
Neil, my understanding has been that HMRC will permit in specie payment of benefits, and transfers in specie between registered schemes, but not in specie contributions other than as permitted by FA 2004 s.195.
Can you locate your source for allowing in specie contributions? Many of my clients would welcome it.