utilising profits

utilising profits

Didn't find your answer?

Small cient has taxable profits of £100k. 30March2014 year end. All things being equal will pay £20k corporation tax, doesn't have a pension scheme. How quickly can this be set up, and £100k funds paid in by Co? I'm working on the basis the deadline for it to be an allowable expense will be the PAYMENT needs to clear before 30March2014 is that right? In which case not much time to set up the fund and make payment.
Payments to the pension may be sporadic with some years no payments; on that basis is a pension fund a good place to dump savings, she doesn't need immediate access to her funds, just wants a good and safe long term investment.not sure if pension is the best move if it's just a few irregular payments of £100k every 5 years.

Replies (6)

Please login or register to join the discussion.

By johngroganjga
26th Mar 2014 10:55

The only person who can tell you how long it will take is the financial adviser the client is going to ask to set up the scheme.

Yes to be allowable for the CT any pension contribution has to be paid within the period.

Thanks (0)
avatar
By User deleted
26th Mar 2014 11:04

To expand on John's point

Whilst a contribution of £100k is likely to be allowable in full, there is no guarantee that it will be - there is the concept of "excessive remuneration". As I say, I suspect that HMRC are unlikely to take the point and try to restrict relief - but they could. (Yes, I have seen them try - unsuccessfully.)

Thanks (0)
avatar
By andrew1211
27th Mar 2014 12:08

There is also the £50k limit

There is also the £50k limit to consider for 13/14 (£40k for 14/15) although it can be more than £50k in certain circumstances.

Thanks (0)
avatar
By tonycourt
27th Mar 2014 13:27

Timing

My experience is that pension companies will accept a contribution as made on the day they have in place both an application and payment.

My understanding is the same as John's, i.e. the date of payment is important because tax relief is given only for a pension premium when it paid not just accrued.  

I'm assuming your client is a one director/shareholder company. In that situation HMRC will not challenge the deductiblilty of a pension premium of any size where it is covered by profits. The psotion might be more tricky if the contribution creates a loss. HMRC confirm this in their BIM manual (I can dig out the reference if you want).

The annual allowance is an issue for employer contributions. If your client has had a pension scheme in place for any of the three immediately previous years she will be able to carry forward unused annual allowances, i.e. the difference between what she (EDIT: and others on her behalf) paid in premiums and £50,000, which will allow a premium in excess of the £50,000 avaialble for 2013/14.

 

Thanks (0)
avatar
By andrew1211
27th Mar 2014 13:22

The annual allowance is total contributions, both ER and EE.

Thanks (0)
Replying to Accountant A:
avatar
By tonycourt
27th Mar 2014 14:21

Agreed

Poor wording on my part - "paid by or on behalf" would have been better

Thanks (0)