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Employer pension contribs - no income or salary

Can employer make substantial contribution when not actively trading?

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My close limited company has had no income other than bank interest for 5 years. Salary and pension contributions stopped several years ago. The retained profit is being run down as dividends are taken. Could a significant employer pension contribution be made to exhaust the remaining funds? Or is it too late for that and might it fail the wholly and necessary for business rule?

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By David Ex
05th Aug 2022 16:35

Not aware of the “wholly and necessary for business rule” but doesn’t look like the company gets tax relief.

You’d need to get your accountant to advise on the best way to extract remaining reserves.

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By Spreaders
05th Aug 2022 16:51

[quote=David Ex]

Not aware of the “wholly and necessary for business rule” but doesn’t look like the company gets tax relief.

That is very true!

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By Paul Crowley
05th Aug 2022 17:09

You would be better off taking the dividend and making the maximum allowable contribution to pension net of tax.
But no information here to say what that would be
Lost tax relief of 20% is higher than dividend tax at about 8%

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By Wanderer
05th Aug 2022 18:44

Didn't you employ an accountant after your last foray into DIY tax?

https://www.accountingweb.co.uk/any-answers/cgt-liability-on-house-sale

Hopefully you did, and they would be best placed to advise.

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By Spreaders
06th Aug 2022 13:04

Thank you Wanderer. Yes I employ a company accountant but I also value the expertise of the wider accountant community.

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Replying to Spreaders:
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By David Ex
06th Aug 2022 16:54

Spreaders wrote:

Yes I employ a company accountant but I also value the expertise of the wider accountant community.

Asking for free advice isn’t really “valuing”, is it?

You need an accountant whose opinions you don’t have cause to doubt.

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By Paul Crowley
06th Aug 2022 19:10

Agree entirely
Wish I had one myself
But Tax Dragon, Dullard and the like cause me to inwardly reflect

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By Paul Crowley
06th Aug 2022 15:59

The pension seller should be able to decide whether the pension contribution is permitted
It is after all what they get paid for

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By Matrix
06th Aug 2022 19:44

If the company isn’t trading then the point you raise is irrelevant. Ensure that the pension scheme knows it is an employer contribution.

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