Small business and corporate pensions

[Jopo1]

Hi, if this isn't the right board to ask my question, please direct me to the right place

My husband and I run a small limited company, just us 2, no employees. We would like to make some corporate contribution to our pensions and do so as a business expense, avoiding corporation tax on the contributions.

Our accountant says we can only avoid corporation tax on the contributions if we pay it into a corporate pension scheme, not if we put it directly into our personal SIPPs. Unfortunately a corporate scheme costs a minimum of £30 per month to run, and that is cost prohibitive for such a small business as ours.

There is also a document from the Pensions Advisory Service that say a small company can contribute to any registered pension scheme and treat it as an allowable expense for the business. Top of p3 of this document here: https://www.pensionsadvisoryservice.org ... d_v1.2.pdf our SIPPs are with Best Invest and Hargreaves Landsdown so all registered and proper!

Is our accountant being over cautious? Everything I have read online states that we can pay into a SIPP and have it count as a business expense, including information from the Pensions Advisory Service.

Thanks for any assistance

Jopo

[PinkDalek]

The Pensions Advisory Service link includes:

In terms of the company’s profits, the payment is an expense of employing staff and in practice would be allowed as a deduction against trading profits of the company for Corporation tax purposes.

In addition, every deduction against trading profits has to pass a ‘wholly and exclusively for the purposes of the trade’ test. It is important to speak to your tax/financial adviser to see whether it is appropriate to make contributions on this basis.

Maybe your accountant (anyone can call oneself an accountant btw) is being cautious on the second paragraph or is misinformed. Perhaps you should direct the accountant to the link provided or to, for instance, https://www.hl.co.uk/pensions/contributions/employer.

[Alaric]

Our accountant says we can only avoid corporation tax on the contributions if we pay it into a corporate pension scheme, not if we put it directly into our personal SIPPs.

Unless there are special circumstances, I would have thought that nonsense. How do one man service companies operate for instance?

As well as SIPPs which have expanded enormously over the last twenty years, there is also SSAS (Small Self Administered Scheme) and other similar arrangements under Corporate Pensions law.

If you have contact with a reliable IFA, they would be the experts on the pension options for a small Company.

[Jopo1]

Thank you both.

My accountant is generally very good and very well qualified, so I don't doubt her advice is coming from a position of knowledge or experience. I just think she is over-cautious, not unqualified or inexperienced.

I don't want to set up SSAS - I have my pension on one platform, my ISA on another, and that's enough for me to manage. My OH has both ISA and SIPP with Hargreaves Landsdown. I don't want to have any more platforms to manage - been there and it's too much!

I also don't want to pay for an IFA (which is my accountant's advice) because we are happy with our long term and retirement planning and just need a definitive answer on this one question.

Jopo

[Alaric]

I don't want to set up SSAS

HMRC

https://www.gov.uk/hmrc-internal-manual ... /ptm043100

Tax relief on employer contributions to a registered pension scheme is given by allowing contributions to be deducted as an expense in computing the profits of a trade, profession or investment business, and so reducing the amount of an employer’s taxable profit.

So no restriction on the type of "registered pension scheme".

https://en.m.wikipedia.org/wiki/Self-In ... al_Pension

Employer contributions are usually allowable against corporation tax or income tax.

Aren't qualified accountants supposed to do CPD, so they know these things?

[fisher]

Your company can pay into its employee's SIPP. I did this many times. When you make the contribution you have to ensure the SIPP provider knows it's an employer's contribution and not an employee's contribution so they don't try to reclaim the tax on the contribution. Youinvest have you select the type of contribution when you pay it in and I'm sure other providers have similar.

I think your accountant is wrong.

[OLTB]

Your company can pay into its employee's SIPP. I did this many times. When you make the contribution you have to ensure the SIPP provider knows it's an employer's contribution and not an employee's contribution so they don't try to reclaim the tax on the contribution. Youinvest have you select the type of contribution when you pay it in and I'm sure other providers have similar.

I think your accountant is wrong.

Agree with fisher - your accountant is incorrect. Two associates of mine who run small Ltd Co's (husband and wife only) both pay into their individual SIPPs and have never had any issues. In both circumstances, one of the pair does the work and the other is a share holder in name only and doesn't really do any of the day to day work. The Accountant has recommended that the main employee who does the work is allowed to pay in the maximum £40k p.a. as a company contribution (fully deductible against Corporation Tax and getting money out of the business with two tax issues for the individual). The other 'name only' employee they are more cautious, as a significant pension contribution could be challenged by HMRC.

Cheers, OLTB.