Hi, This may seem like a very tedious question to some of you, but I come from a very small department that I run and I always tend to do the same typical accountancy and tax services with a few odd topics that I read up on, so please bear with me.
I have a client who is a director of a limited company. He has begun paying into a company pension through the business. I am aware that as it is not a typical employee and employer contributes set up, I do not have to process the pension contribution through the payroll.
This then leads me to the confusion over what next. I understand how to disclose the pension contributions in the company accounts and the correct tax treatment for corporation tax, however do I not need to disclose that he has received this remuneration on his personal self assessment to be included in his taxable income?
If I do disclose it, how do I obtain that information, as it will not be included in his P60 as it isn't being processed through the payroll.
Sorry to ask what may seem a bizarre question, but it is difficult to remember things after learning in college a long time ago and then never putting it into practice. I guess I am just safeguarding against any unpleasant comments from members who feel my question isn't worthy of this forum. However I would see this question as being perfectly acceptable here as this website wasn't designed for accountants who know everything and just want to discuss technical loopholes and reforms. (not everyone is a tax specialist, a lot are students or work in small practices on their own so have no-one to bounce/discuss topics with and have small clients who require a rounder accountant who provides constant contact, business advice and a more personal and involved service.
Any help/advice would be greatly appreciated, thank you.
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Pension contributions by an employer are not income for the purposes of the individual's tax return. It's as simple as that really.
Hi John, thank you for your reply. Ok that is fine. I was thinking that but I have a habit of questioning something and with no colleagues to ask i find it hard to get clarification anywhere else online (forget HMRC and its ever so unhelpful website!). Can I also just confirm, do I enter the company pension contributions on the directors self assessment? Thank you.
Nothing to enter on SA return
Can I also just confirm, do I enter the company pension contributions on the directors self assessment? Thank you.
Just to expand on John's comment, you do not claim the pension contributions paid by the company on the director's SA tax return, just as you don't disclose it as remuneration.
No, as I said it's not income for the purposes of the director's tax return in any way, shape or form. Sorry if I did not make that clear.
It is of course remuneration for the purposes of the directors' remuneration disclosure in the company's accounts.
Personal pension scheme or company scheme.
If it is a personal pension scheme then best charged to directors loan account (and tax relief given off payments made net) - but still enter on SA return.
If it is **definitely** and company scheme then will be paid gross and be a legitimate company accounts cost allowable for CT purposes.
Key factor is to get away from bland statements like "Pension Scheme" and look as to whether is it a PERSONAL scheme or a COMPANY scheme, unfortunately investment advisors, in my recent experience, can give incomplete, vague or incorrect information (they seem to have the attitude sell the scheme, get the commission, job done - no after sales support).
I'm always a bit 'nervous' over these payments... I would 100% confirm very very clearly that these contributions are a COMPANY contribution to the pension scheme, and not a PERSONAL contribution, but paid by the company.
Get any and all paperwork to make sure it's treated right...