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Can company pay personal pension contributions?

Can company pay personal pension contributions?

Before he incorporporated his business  client was paying premiums to a personal pension, after deduction of basic rate tax.    These continued to be paid by the company and have been regarded as a 'private' payment in company acconts.   Financial adviser has told him that they can be treated as an expense of the company.

My understanding is that you cannot have tax relief on these premiums twice - once by paying net premiums and then as a charge against CT.   To claim these against CT don't the premiums have to be regarded as an employer contribution and paid gross.

Am I right or the FA?   If the client were to be a higher rate taxpayer anyway, then wouldn't he be better off paying the premiums himself and being able to claim 40% tax relief?


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05th Feb 2011 10:40

Silly question

When are IFAs ever right about tax?

If the company is paying the director's personal pension contribution net of tax relief, you must either charge it to the director's loan account or treat it as a taxable benefit of settling the director's personal debts, which is one of those BIKs that does not go on a P11D, but must be processed through the payroll - in which case the net premiums plus er's NI would be allowable as a business expense of the company and the director would still disclose the net contributions paid on his own SA tax return.

If the pension company is contacted to change the policy to one where the employer pays the contribution gross, then as you say, the gross contribution would be a company expense and the director would have no claim for relief.

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By geoffmw
05th Feb 2011 20:04

and it saves

NI of at least 14.8% from 6.4.11 less  course some corporation tax.

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By PennyC
06th Feb 2011 10:49

One minor correction to Euan's post

If the company meets the individual's personal liability, the payments do go on the P11D - for income tax purposes. But processed through payroll for NI purposes.

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