SIPP info needed

[Little'Old Me]

The reason the HMRC are not making a big thing about large contributions into SIPPS, is that eventually they'll get their share when you take it as at that point it become part of your taxable income. (Of course it also ensures that the state does not have to bail you out either).

Also if you die before taking the benefits as a annuity - there is currently a 35% tax on the lump sum paid out to your estate. A lot more than the 21% Corporation Tax you'd pay if you hadn't paid it into the pension.

Of course if you don't die - then there is no 35% extra tax for the HMRC!

[Little'Old Me]

Found it!

"In the case of a trade or profession, employer contributions will be deductible as an expense provided that they are incurred wholly and exclusively for the purposes of the employer’s trade or profession"

"Broadly, the employer’s contribution will be wholly and exclusively for the purposes of the trade if the contribution paid in respect of a controlling director or a connected employee is in line with a contribution that would have been made for an unconnected employee in a similar situation."

Clear as mud!

[Fred Bloggs]

I think you must lose your employer's NI that way ? Anybody know how that works out ? I suppose I should ask my accountant.

There would be no employers NI due in the case of a salary sacrifice. I fully intend that my last year or maybe two of contracting income will go entirely into my SIPP. Probably looking at an 8 or 9 year timescale before I'm in a position to do that and retire though. I'd be 60 or 61.

[Little'Old Me]

There would be no employers NI due in the case of a salary sacrifice. I fully intend that my last year or maybe two of contracting income will go entirely into my SIPP. Probably looking at an 8 or 9 year timescale before I'm in a position to do that and retire though. I'd be 60 or 61.

And Salary sacrifice is considered an expense incurred wholly and exclusively for the purposes of the employer’s trade or profession.................

[ASB]

And Salary sacrifice is considered an expense incurred wholly and exclusively for the purposes of the employer’s trade or profession.................

I'm not sure it's necessarily plane sailing and HMRC could raise objectections; but I don't see what grounds they would have ultimately to refuse the CT allowability.

Also I wonder what the downside actually is were they to do this. Ok, CT becomes payable, but were it not then it the monies would have been paid as a dividend, this would have attracted some higher rate tax which could not have got releif because there was no pensionable income. If the money was paid as salary then there is NI up to the threshold plus employers NI so I suspect in a lot of cases the effect would be broadly neutral anyway.

Of course there is also the possibility of setting a FURBS rather than a SIPP or other pension; but this is an entirely different regime anyway.

Incidentally the large company I work for has just insisted that all pension contributions are made by salary sacrifice pointing out that this in effect means all higer rate taxpayers will be saving 1% of the contibution amount and standard rate taxpayers will be sacing the 10 odd percent NI. They didn't offer to split the 13% ER's NI they are a saving. A number of millions annually for the company - so maybe some of it finds its way into the bonus or salary review pots.

[Little'Old Me]

I'm not sure it's necessarily plane sailing and HMRC could raise objectections; but I don't see what grounds they would have ultimately to refuse the CT allowability.

There is a tax case the HMRC use to show "Money laid out by directors for their own benefit not for the purposes of the company's trade"

If you are bored, you can read about it here:
http://www.hmrc.gov.uk/manuals/bimmanual/BIM37745.htm

[ASB]

There is a tax case the HMRC use to show "Money laid out by directors for their own benefit not for the purposes of the company's trade"

If you are bored, you can read about it here:
http://www.hmrc.gov.uk/manuals/bimmanual/BIM37745.htm

Yes, there is always something. I think that is still the one they use to attack a 20k salary paid to the mistress.....

[Little'Old Me]

Yes, there is always something. I think that is still the one they use to attack a 20k salary paid to the mistress.....

Funny you mention the "mistress"......

Theres nothing to stop anyone from paying £2,880 each year into a pension/sipp etc for their children, wife who does not work....... The HMRC will top it up with £720 tax free rebate, so £3,600 each year gets paid in. This is no requirement to be a tax payer to get the tax free rebate benefit up to this amount!

Instead of giving them lots of extra pocket money, or top up the housekeeping!

If you do it for your wife, she can have her own pension and pay for you when she gets it!

[Ruprect]

Funny you mention the "mistress"......

Theres nothing to stop anyone from paying £2,880 each year into a pension/sipp etc for their children, wife who does not work....... The HMRC will top it up with £720 tax free rebate, so £3,600 each year gets paid in. This is no requirement to be a tax payer to get the tax free rebate benefit up to this amount!

Instead of giving them lots of extra pocket money, or top up the housekeeping!

If you do it for your wife, she can have her own pension and pay for you when she gets it!

IANAA but that sounds like gonads to me.

[Emigre]

Funny you mention the "mistress"......

Theres nothing to stop anyone from paying £2,880 each year into a pension/sipp etc for their children, wife who does not work....... The HMRC will top it up with £720 tax free rebate, so £3,600 each year gets paid in. This is no requirement to be a tax payer to get the tax free rebate benefit up to this amount!

Instead of giving them lots of extra pocket money, or top up the housekeeping!

If you do it for your wife, she can have her own pension and pay for you when she gets it!

Let me confirm... as a director of myCo, myCo can pay £2,880 into a SIPP for my children each and every year. Is this payment tax deductible in myCo? And then HMRC add a tax credit? Can I do this for all of my children? And all my wives? What about the cat?

This doesn't sound right. Looks like the tax benefit comes round twice - most unlike HMRC who normally want it twice. If its out of personal funds not the same.