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Any Answers Answered: Employer pension contributions

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TaxTV's Giles Mooney and Tim Good tackle two conundrums from the pages of Any Answers on employer pension contributions and the annual investment allowance.

8th Feb 2022
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To view the full questions and AccountingWEB reader answers click on the links below:

Employer pension contributions

The first question from Jigs concerns employer pension contributions. 

The AccountingWEB reader has had a query come via their client's financial adviser. "The director/shareholder would like the company to pay his wife, however instead of paying her a salary they have agreed that they wish it to be made solely as an employer contribution into her pension scheme. 

"IFA is saying this is only possible if she has earnings from the company also but surely they can choose whatever combination they wish?"

AIA affecting distributable profits

In the second question, AccountingWEB user Lmb17 is looking for a straight forward answer to this annual investment allowance (AIA) conundrum. 

The AccountingWEB user has a one-year old limited company with a P&L of £36k and they've just bought a van for £8k.  

The £8k will be classed as AIA and the corporation tax will be payable on 36k-8k= £28k. 19% corp tax = £5320.

The question is, "In order to use dividends to offset director's loan account currently £18k dr, is the £36k distributable? Am I correct in understanding that AIA does not affect the distributable profits? (I know there will be some depreciation to consider in the P&L too)."

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