Can I contribute to SIPP if I pay no salary/dividend from ltd company

Can I contribute to SIPP if I pay no salary...

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Last year I set up a limited company to receive rent from a commercial property (company A). I have taken no salary or dividends from this company.

My main source of income is from company B which provides me with a regular salary and dividends.

I have an existing SIPP and have made contributions into it from Company B in the past.

This year I would like to make a single lump sum contribution into the SIPP from Company A instead.

I do not take a salary from Company A so wondering whether HMRC rules would allow this ?

Replies (15)

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By Justin Bryant
01st Sep 2014 14:37

Yes

That's all OK, subject to annual allowance etc.

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By Justin Bryant
01st Sep 2014 16:39

Yes

Assuming they are happy to accept company contributions (some pension providers ask you to fill in a load of forms first for this or may have some other objection, so just phone them to check this).

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By cathroberts1
02nd Sep 2014 16:48

Not sure

I was under the impression that you had to be in reciept of employment income from the company in order to receive a company pension contribution?

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By Justin Bryant
02nd Sep 2014 17:05

What case law or legislation says that?

He is a 100% shareholder & director so the company can remunerate him as it likes with no cash salary and just a pension contribution. It may be difficult getting the pension provider to accept the payment, but that is just a bureaucratic difficulty and not a company law or tax law difficulty.

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By cathroberts1
03rd Sep 2014 09:29

Tax implications

Thank you, I have recently come across a very similar situation. We concluded that even though a company is allowed and there is no legal implications, some remunerations of directors are not allowed as a business expense thus not making the savings on the CT. HMRC consider the overall remuneration package of the directors and in some cases of "a large leap of remuneration it would indicate to HMRC that the contributions were a diversion of income made to achieve a fiscal purpose and were not paid wholly and exclusively for the purpose of the business" and therefore not an allowable expense.

There may be implications that the OP should be aware of before making this decision.

I must admit, this is another subject where it is not easy to come to a satisfactory conclusion. A case of the more you read into it, the more complicated it becomes.

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By johngroganjga
03rd Sep 2014 10:08

Your point is about the total quantum of the remuneration package, but nothing to do with how it is made up or the relative proportions of he different components within it.

This is a different point from the one you made in your post yesterday, which as far as I am aware Justin has answered correctly.

Your new point is absolutely correct of course.  HMRC can always challenge un-commercial remuneration.

 

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By cathroberts1
03rd Sep 2014 12:22

Indeed

It certainly is a different point. I was led to believe that you did need to be employed in order to receive a company pension. I now know different and it is posts like this that increase our knowledge so effectively. I have now made sufficient notes on this subject and will be better prepared next time this crops up.

Thank you

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By johngroganjga
03rd Sep 2014 12:27

Yes you do need to be employed for the company to pay into your pension.  But that's not what you said.  You said that you thought the individual had to be in receipt of employment income (obviously excluding the pension contribution in question).  That is what was not right.

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By Portia Nina Levin
03rd Sep 2014 12:39

Balderdash!

ICI can contribute to my pension if they want to, there is absolutely no need for me to be an employee.

They will only get tax relief if it is for some business purpose, such as if I am a director and run the motherloving company.

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By johngroganjga
03rd Sep 2014 12:42

Yes of course but that is a reductio ad absurdum.  What I am sure you realise I meant was "to get tax relief on the pension payment".

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By Portia Nina Levin
03rd Sep 2014 12:44

Reductio ad absurdum?

You do not think I could run ICI? I damned well could. I am just a bit busy!

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By johngroganjga
03rd Sep 2014 12:52

ICI

Before you did so you would need to bone up a lot on its current operations as it no longer exists.

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By Portia Nina Levin
03rd Sep 2014 12:58

Of course I knew that!

No idea why they keep putting money in my pension though.

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By cathroberts1
03rd Sep 2014 12:58

Clarification

Of course, perfect sense (obviously meaning your reply not my posts).

Every day is a school day.......................

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