Private pensions and paying into them via Ltd company

Hi, As a company director if I pay some of the income of my company into a private pension, is there anything I need to do to verify what kind of pension pot it is? At the moment it is a payment that is going out every month to a pension provider and it is showing up as such on the bank statements. Thanks

Hi Toobyy,
HMRC have no need to verify the type of pension pot.
We do need to know if the pension was set up and paid by the company on behalf of the director or is it an existing private pension set up prior to the directors appointment.
Thank you. 

 

Thanks for the confirmation. How does one go about informing you of this? It was not set up prior to the directors appointment but set up by me (as the director) as a private pension.

Hi,
We assume that you are contributing to a registered pension scheme.
If so, the amount the company contributes directly to that scheme will be an allowable expense for tax purposes provided there is no non-trade purpose for the payment.
The deduction for the company’s contribution can be claimed in the company’s accounts.
The accounts will have to be filed with HMRC and form part of the company’s corporation tax return.
The guidance in HMRC’s Business Income Manual at BIM46035 which will help you to decide if there is a non-trade purpose
Contributions by the company count towards your annual allowance. This is  the maximum amount of pension savings an individual can make each year with the benefit of tax relief.
Please see the guidance in HMRC’s Pensions Tax Manual at PTM05110 
For queries about pension schemes please contact Pensions Schemes Services. Online/phone/postal contact details can be found on the gov.uk website at:
Pension schemes
Thank you.

Hello, I have the same question. Can the LTD company contribute some of its income to a private pension held by a director? In my case, there are no employees, only 2 directors (close company) and the director's pension is an existing private pension that was set up prior to the directors appointment. Is this allowed and if yes, will this be considered as allowable expense for corporation tax purposes? Thank you.

Hi silvnic,
Please consider the guidance in the business income manual at BIM46000 onwards this deals with contributions to registered pension schemes and unregistered pension schemes. it is recommended that you take professional advice before making your decision.
Thank you.

Hello, I have read BIM46000 and also BIM46035 and given your earlier response by HMRC Admin 8 on 12/12/023 I understand that: The employer (LTD company) can offer a remuneration package - that was wholly and exclusively for the purposes of the employer’s trade - to the directors in the form of pensions contributions to a registered pension scheme (i.e. a Vanguard SIPP) then this remuneration package is an allowable expense for corporation tax purposes. In addition, according to BIM47105, this remuneration would need to be at a reasonable level of the reward for the value of the work undertaken by that individual. Can you please confirm that the above is correct and if not please clarify the correction. Thank you.

Hi 
The information that you have provided agrees with HMRC guidance here:
BIM46035 and BIM47105. 
Thank you. 

 

Tooby states that the "scheme was set up by me (as the director) as a private pension". One thing HMRC Admin team haven't raised is whether the pension is correctly being paid as a company contribution to the scheme. To get the tax relief correct in both the company and for the individual, the company has to make gross EMPLOYER contributions to the scheme. If Tooby or silvnic are making payments from their company into their personal schemes which have not been correctly identified as employer gross contributions, the contribution will be treated as a net personal contribution and tax relief will be added by the pension scheme. This will mean that that tax relief is being given twice, once to company and again to director. Employee/director net pension contributions should be deducted from net pay of the director rather than as an expense payment of the company. I see lots of errors of this type.

HI,Can a Ltd company pay pension to the shareholder who is not a director but on regular basic income and can this be payed for the last three years as a lump sum?

Hi ,
 

Unfortunately HMRC cannot provide accountancy advice. You will need to engage the services of a professional advisor/accountant, to assist you with your enquiry. This may have wider tax implications for other Heads of Duty. Thank you .

Hi not HMRC Admin but pension or wages can only be paid to employees or directors as remuneration for the work they perform and is only deductible from corp tax calculations if wholly and exclusively for the purpose of the trade. So if the remuneration was excessive for the duties carried out you would disallow the excess. Shareholders are only entitled to dividends. They can't be paid via pension or wages.

Regarding this comment from "HMRC Admin 25 Response" "We do need to know if the pension was set up and paid by the company on behalf of the director or is it an existing private pension set up prior to the directors appointment." What would be the reason of HMRC needing to know if it's a pension setup by the company and a pre existing private pension? Just that I don't currently have either, so could setup up one or the other if one isn't allowed.

Hi ,
 

To ensure the correct relief is applied as tax relief is applied differently see :  Types of private pensions      and :  Tax on your private pension contributions   gives more information  . Thank you .

I am the director of a limited company and and an employee on payroll. I have made monthly contributions to my work place pension (along with a monthly contribution from my employer) from PAYE, and also have made regular contributions to another private pension. I complete a self assessment tax return to claim due tax relief as I am a higher rate tax payer. I understand that personal contributions, and tax relief (but not the monthly employer contributions?) made to my work place - and personal contributions, and tax relief paid into my personal pension, should be included in my self assessment tax return. My limited company has also made a lump sum directors contribution to my private pension. I understand that this will be deductible from corporation tax and therefore should NOT be included in my personal pension contribution total as it is not eligible to be considered for personal tax relief. However, as I understand it, this lump sum contribution WILL count as part of the £60k total pension contribution limit. Please could you confirm that I understand the above correctly as confirm where (if anywhere?) in my self assessment tax return I should enter the lump sum directors contribution?

Hi there - I want to set up ONE pension and contribute via my limited company and my personal account is this possible? Best Emma

Hi emmafrancis,
Yes,you will need to discuss with the pension provider.
 They will claim 20% tax relief on your payments from HMRC and if you pay tax at 40% or 45%, you claim the extra relief through your personal Self Assessment tax return, if you complete one or in writing to HMRC BX91AS along with supporting evidence from the pension provider confirming payment made.
Thank you. 
 

Hi QsforSE K,
Yes, this payment counts towards the 60k limit for the annual allowance.
Please see additional guidance here:
Tax on your private pension contributions
Thank you.