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Context: i)ESM00035 says deemed payment received by the LtdCo could be withdrawn by the Director as non-taxable dividend. Advantage: No RTI from LtdCo required. ii) For sole shareholder, sole director LtdCo, no pension enrolment required. Just checking whether it is possible to take advantage of (i) & (ii) to avoid the 'redundant RTI' by the LtdCo and at the same time avail SIPP pension tax relief. Firstly, is deemed payment classed as "qualified earnings” for pension contributions?or does it require RTI from the LtdCo to make it so? If deemed payments are allowed as "qualified earnings”: case 1: the director can contribute to their SIPP and receive the pension tax relief, with deemed payment withdrawn as non-taxable dividend, no RTI - simple to implement, would that be right? case 2: if the LtdCo pays employer contributions into the director’s SIPP, in what way can the Director claim pension tax relief?

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20th Apr 2021 20:37

How does the non-taxable dividend work?
If you allocate salary payments to the director as non-taxable dividends in the accounts then won't the company profit increase and a resultant corporation tax liability?

Would it be better to do the RTI as non-taxable salary and claim this as an expense to reduce profit and reduce corporation tax?

Also, would it be better to make the pension contributions personally and save 40% income tax? Rather than making an employer contribution and saving 19% corporation tax?

I would assume that a deemed payment is qualifying earnings as the fee-payer would have processed payroll and given the contractor pay slips and P45/P60, i.e. it is employment income.

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Replying to GR:
By Accountant_not
20th Apr 2021 21:34

ESAM10035 is clear that CT is relieved by s141A, a deduction equal to the net amount received by the LtdCo, leaving taxable profit of 0.

s 61W Chapter 10 ITEPA 2003 seems to say the deemed payment can be treated as employment income for pension purposes as well. Personal contribution to SIPP is fine.

Removing the rigmarole of a second RTI from LtdCo (first RTI done by the Fee Payer) makes this approach efficient for all, doesn't it?

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