Apologies for what I think might be a stupid question.
I'm sure I've read in the past (or at least dreamed) that HMRC could challenge the corporation tax deduction of employer pension contributions that exceed profits in the year.
However, when I try and find something concrete on this I keep coming back to BIM46035, which does talk about the requirement for the contributions to be W&E for purposes of trade, but doesn't specifically cover the point about profits in the year. I see that there is a link between the two, but wondered if anyone knows of anything more specifically covering my point.
As an example, take a company with a 31/03 year end, with a sole director and shareholder and no other employees. The company will be dissolved and the director wants to make a pension contribution before doing so. The employer has contributed £40k this tax year already. The employer intends to contribute a further £40k next tax year, and it will then start the dissolution process in May.
However, given that they won't be generating any income in April / May, there won't be any profits in the year. There are, however, sufficient retained profits from which to pay the contribution.
Does anybody see an issue with this?