Making employer contribution to a SIPP as a sole director.

I am enquiring whether tax relief applies in the following case. A Ltd Co, one director, no other employee, SIPP was opened ofter appointing the director, director receives no renumeration from the Ltd Co, company is a trading business and makes profit. Can the director make pension contribution into his / her SIPP? Will this contribution be treated as business expense? Does the contribution qualify for tax relief? What is the limit of the contribution in one tax year?

Hi,

Yes, a payment can still be made to the SIPP as this confirms the maximum that can be paid.

Tax on your private pension contributions

The contribution is not a business expense.

Thank you.

Just to confirm; If a director / employer of a Ltd Co, makes contributions to a SIPP out of the business fund, the contribution it is not treated as a business expense? So why do pension providers insist that directors contribution to a SIPP will be offset against the corporation tax of the Ltd Company? Many thanks.

Hi Raymond

Your employer is making these payments into the pension fund out of the business fund, on your behalf, so they need to set this against their business tax.  
You are not making the payments, so you cannot claim tax relief.

Thank you

I am not sure if I explained this well. Here is my question put in a clearer manner; I am the sole director and employer of my own Ltd Co working in the building trade. I receive no renumeration from my Ltd Co, as I have other income from property investment. There are no one else working for my Ltd Co but me. My Ltd Co pays contribution into my SIPP from the business bank account. Would the contribution the business makes into my SIPP qualify as business expense? Thanks

Hi ,
 

Please review PTM043100 - Contributions: tax relief for employers: introduction, this implyes that all contributions into your employees pension can be deducted. In this mater contribution made on behalf of the director are the same as employess .   Thank you

Hello HMRC, I have further questions on this please, which are not covered in CTM08340, which your referral to PTM043100 leads to. -I am sole shareholder and director of a limited investment company which makes £100-£300k per year profit from interest income -if I take no salary from that company, would a payment of £60,000 by that company into my personal SIPP be an allowable expense for corporation tax purposes? -if the company pays £180,000 into the SIPP for this year's pension limit and the 3 prior years', is that also an allowable business expense? There is no guidance on HMRC's website about making employer's payments to SIPP from investment companies, if no salary is taken. Thank you.

Hi S Rowe,
We are unable to advise what expenses are deductible or not.
Corporation Tax is self-assessed and it will be up to you to review the guidance and reach a decision. Please refer back to the guidance at: 
CTM08340 - Corporation Tax: management expenses: pension contributions: contents - HMRC internal manual
If your still unsure please refer to an accountant. 
Thank you

I and my accountant have reviewed every page of your guidance and it does not help. Please answer the following: 1) this is an investment company, not a trading company. Is it correct that CTA09/S1219 therefore applies? 2) in 1219, there is no "wholly and exclusively" test and L G Berry Investments Ltd v Attwooll 41TC547 turns on whether directors fees were reasonable, "having regard to the requirements of the company’s business and, in the case of directors’ fees or other payments for services, to the actual services rendered to the company" Since the wholly and exclusively test doesn't apply, the commissioners in Berry v Attwooll allowed about 1/3 of the profit as management fees. Having consulted https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm08170 and https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm08330, is the figure of about 1/3 of the profit in an investment company an allowable amount for the director to be paid for management services if they spend a few hours per week reviewing the investments, and not other activities for the company? 4) can the payment for management services therefore be made by way of a pension contribution, if no salary or dividends are paid to that director?

Hi 
Corporation tax is self-assessed and HMRC cannot give tax planning advice. 
HMRC cannot give a definitive answer what kind of expenses are occurring and how you would like to treat them.
If there is uncertainty in the guidance, you may wish to review non statutory clearance.
Find out about the Non-Statutory Clearance Service.
They may be able to help you clear up any gaps in the guidance. 
Thank you.