pension tax relief

Making payments from a rental business qualifying for pension tax relief ?

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A husband and wife own a number of properties jointly . The husband is a self employed accountant not registered for vat as years are advancing and business slowing. Is there any reason why the husband can not charge fees to the joint rental account to apportion costs  for his staff and charge for his time used in running and accounting for the rental operation. All the charges being relevant ,reasonable wholly exclusively etc.  

This being agreeable the fees etc would become part of the overall fee income for the accounting business and be liable to tax and class 4 nic , if the inclusion of these fees were to push profits to be taxed at higher rates then pension contributions would also be available for pension tax relief at the highest rate operating ?

Replies (18)

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By AnnaKournikovasKnickers
20th Sep 2017 23:27

The premise of your question is flawed. You don't get "tax relief" on pension contributions. You get tax deferral. If you have discovered a way of getting 'tax relief' let me know immediately.

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Replying to AnnaKournikovasKnickers:
By Ruddles
21st Sep 2017 09:48

[redacted]

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Replying to Ruddles:
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By AnnaKournikovasKnickers
21st Sep 2017 09:22

"Clueless" Really.? Until ACT was abolished during the Brown Terror pension funds were tax exempt. Now they have no more internal atx efficiency that any other collective investment fund.The only 'tax efficiency' remaining is for a single premium to offset higher rate tax when it arises which will be taxed at the standard rate when the fund is decumulated.

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Replying to AnnaKournikovasKnickers:
By Ruddles
21st Sep 2017 09:31

If I can reduce my net tax liability - reducing it at 45% today with some of the investment being taxed at 0%, and some of it at 20%, in 20 years' time - I consider that to be a tax relief.

Indeed, if I can reduce my tax laibility at 20% today, and have the return taxed at a mix of 0% and 20% tomorrow, that to me is a relief from tax.

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Replying to Ruddles:
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By AnnaKournikovasKnickers
21st Sep 2017 09:38

100% agree. So let's meet in the middle and call it 'partial tax relief'. But the current HMG scam of forcing employers to corral employees into Auto Enrolement pensions that will simply by abated against their benefits when they retire for the 'target audience' abuses the term 'relief' Different argument I know. But relevant.

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Replying to AnnaKournikovasKnickers:
By Ruddles
21st Sep 2017 09:48

Agreed

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By elyob
21st Sep 2017 00:44

What legislation are you replying under please

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Replying to elyob:
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By AnnaKournikovasKnickers
21st Sep 2017 00:54

ICTA

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Replying to elyob:
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By AnnaKournikovasKnickers
21st Sep 2017 00:54

ICTA

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By elyob
21st Sep 2017 03:14

The point of the question was in two parts , the first was could the charge for fees and costs be charged by the individual to the joint rental account account being an allowable expense to the rental account and then assessed on the individual if this was the case then there would be a liability to tax on his profits at higher rates
Then on the basis of the above being so .
can qualifying pension contributions be made to a pension fund (net ) with the additional tax relief being claimed by filing a tax return .
What is known as obtaining tax relief on pension contributions.
I don't see any deferral , whatever happens to the fund .
You could have virtually immediate uplift of the fund and the uplift will be considered in light of the circumstances prevailing circumstances will but this is not related to the actual contribution

by making a tax return .this is effectively getting tax relief on the contributions made . It is not a deferral it is actual tax relief in the year in question what happens the fund in later years is determined by a number of different events

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By JCresswellTax
21st Sep 2017 09:45

I think this sounds ok if done on a commercial basis.

I trust you have done the sums to make sure there is a benefit in doing this.

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Replying to JCresswellTax:
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By Accountant A
21st Sep 2017 13:06

JCresswellTax wrote:

I think this sounds ok if done on a commercial basis.

Presumably this only works if his accountancy practice is a separate legal entity? Otherwise he is just paying himself.

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paddle steamer
By DJKL
21st Sep 2017 12:20

Is it really worth it if Class IV bites on the fees charged?

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By elyob
21st Sep 2017 17:19

So we are agreed the premise of the question is not flawed the tax relief is of course granted . It doesn't matter single or regular premium, it is all in the one calculation and as a further point the contribution may in the right circumstances reinstate a lost personal allowance..giving even more tax relief .The points made by ruddles are correct of course and the only hesitance one could moot on deferral of tax would be if the tax regime changed in the future to tax at the end by denying the tax free sum and taxing all at the rate the tax relief was granted. But not worth discussing that which is the only point I could see Anna that would have related to your very strange reply.
Now the question was in two parts , the first was can the accountant charge the joint rental account so that this strategy can operate . I believe yes as it is completely at arms length ( except for the consideration that the accountant is charging himself ! )

As an aside the comment on auto enrolment is 100% correct . This is absolutely guaranteed.. guaranteed to develop into a miss selling debacle and the government will pay compensation for it . Small business pays in a pittance relative to what is required to fund a pension and they find it difficult to pay this ,advisers are afraid to recommend funds with risk , risk and a long time period are the two constituents of planning and investing and advisers are directing investing in to cash funds so that no money is lost and they won't be sued , understandable,
whilst denying the investors who in the main have (in every walk of life ) no idea what they are doing ( and why should they , investing occupies a small part of their life and is boring and complicated and riddled with fake news and marketing ) any chance of a meaningful return .
The whole scheme borders on providing in my opinion a delusion to those who can least afford to be led that way.

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Replying to elyob:
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By AnnaKournikovasKnickers
21st Sep 2017 21:43

Perhaps I was being two subtle. I was not referring to deferral of the premium being set against income. But to the fact that 75% of the emerging benefits, whether in the form of an annuity, or drawdown will be taxed at the client's then marginal rate. That is the 'tax deferral' to which I eluded. I see nothing "strange" in stating that.Is that worth all the paraphernalia of tax codes etc for 20%? Bung the money into an investment trust and get it tax free at the end.

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By elyob
21st Sep 2017 22:57

It appears the premise was not flawed which was clearly the case otherwise I would not have suggested it Ruddles confirmed the point forcefully and in fact ...not only is the relief granted as he suggested but there is an under utilised thought on this matter that depending on the figures not only will the relief be granted but one may also with careful premium selection be able to reinstate a personal allowance which has become lost as a result of profits breaching the limit at which the personal allowance is progressively lost. One final point on the fund itself it is I suggest not the same as any other collective fund as the gains within the fund do not suffer capital gains tax .
The question of the pension contribution appears settled but the other part of the question was could the accountant charge fees and apportion costs ...arms length .. to the rental account and be qualifying in their accounts ... bearing in mind that he was charging at least in part himself.

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By elyob
21st Sep 2017 23:10

Sorry all I missed the other latter contributions . Yes it does work on the figures in this case we are dealing with 40 % tax relief and reinstatement of personal allowance but correct to point out the class 4 which I had referred to and been aware of in the original question. The figures do work if the charging for fees etc work . I know it would work if the accountant ( seperate practice , yes ) set up a limited company and charged the rental account thereby reducing the rental profits saving 40 % and suffering tax at the lower corporate rate but the immediate tax saving via the pension fund together with reinstatement of personal allowances and having the investment running from the start with the tax free element at the end together with the managing of the uplifted sums in future years seems attractive

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By elyob
28th Sep 2017 10:06

thanks to all who assisted

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