Salary sacrifice arrangements

Salary sacrifice arrangements

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Family owned business has no employees other than Directors who do not have service contracts/employment contracts with the company. Company results indicate large profits. Is it possible to vote the Director a bonus (minuted in the normal way) and for them to then enter into a sacrifice arrangement so that a large pension contribution can be paid instead of the bonus? Hopefully this would assist with the wholly and exclusively test for a large pension contribution as it relates to the giving up of contractual remuneration.I am concerned about the timing issues with regard to the documenation. Should the minute voting the bonus be dated the same as the bonus sacrfice agreement? HMRC examples of a successful salary sacrifice refer to "senior employees", who are not directors. Any comments would be appreciated.
SJJ

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By AnonymousUser
20th Aug 2008 13:59

Just pay the contribution
This used to be the way it had to be done for large pension contributions, but this is no longer the case (for well over a year now). See BIM46035.

Pension contributions are now looked at as part of a remuneration package rather than as a separate item. Therefore if the bonus that is to be sacrificed is W&E, then a pension contribution would be too.

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By Dave Paveley
20th Aug 2008 07:59

Yes Doug..

..but it may fall foul of the wholly and exclusively test that HMRC have been a little vague in their interpretation of.

I use salary sacrifice arrangements just to be safe when large contributions are planned and see no issue with the dating of the documents. It would be quite normal to draw them up on the same day.

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DougScott
By Dougscott
19th Aug 2008 17:19

Am I missing something? Can't the company just pay whatever the amount is into the pension scheme?

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