Employer pension contributions to second shareholder?

[chrisl]

Situation is a one man limited company paying min wage and dividends.
Company has a second shareholder, a wife who is a 40% shareholder and does not work through the company at all. She is NOT an employee.

Can the company make employer contributions to her pension scheme as she is just a shareholder?

If so, does anyone know where i can find confirmation in writing?

[Grinder]

There's no tax benefit, as pension contribs are all from the gross anyway. Well, I guess there is if you count the difference at retirement age.

Are you just looking to make sure she has a pension of her own?

[chrisl]

Corporation tax saving at 21% you get though.

[Grinder]

Corporation tax saving at 21% you get though.

I should have said - I am just comparing it to just adding the pension contribution to your own.

[chrisl]

Yes i understand she can just pay in personally, i am just looking for the answer to the actual questions itself to see if she can pay it this way from the company if they wanted to.

[malvolio]

Yes i understand she can just pay in personally, i am just looking for the answer to the actual questions itself to see if she can pay it this way from the company if they wanted to.

Not an expert but if she isn't an employee you can't really pay her employee pension contributions without Hector taking a close look at the tax position. Also, there is a percentage cap on the ratio between pensions contributions and gross salary. Unless there are other reasons, you are better having one conventional pension pot such as a SIPP.

[Grinder]

Also, there is a percentage cap on the ratio between pensions contributions and gross salary.

I thought this was dropped when Brown decided to tax pension funds direct.

[ASB]

Situation is a one man limited company paying min wage and dividends.
Company has a second shareholder, a wife who is a 40% shareholder and does not work through the company at all. She is NOT an employee.

Can the company make employer contributions to her pension scheme as she is just a shareholder?

If so, does anyone know where i can find confirmation in writing?

No you may not make employer contributions because you are not her employer. [Strictly not true, you CAN make them but they are not in the purposes of trade and therefore not deductible as a CT expense]

If you really want to do this (and it might be benerficial depending upon both of your exact tax position) make here an employee. Give her a salary of X, she makes salary sacrifice of X to make actual salary 0. Company now pays X un employer contributions into her pension. [There is still potentially the hurdle of purpose of trade to cross, though if she does something to justify the notional X salary it should be OK. Alternatively if she is a director or office holder it would be easy enough to compensate here on that basis, will depend of course on how much X is whether HMRC might like to challenge].

Of course you personally can contribute to her pension and still get the tax relief.

Edit: for confirmation in writing best bet is to ask your HMRC office for an opinion

[chrisl]

Of course you personally can contribute to her pension and still get the tax relief.

Thanks ASB.

Can you expand more on the above quote.

How would/could the husband contribution to wifes pension fund and get the tax relief himself?

[ASB]

Thanks ASB.

Can you expand more on the above quote.

How would/could the husband contribution to wifes pension fund and get the tax relief himself?

You don't get it. The pension fund gets it. BR Relief only as far as I am aware.

So you pay 2808 into the fund, fund gets credited with 3600. [Current figures will be slightly different]. This is the deminimis limit you can pay for anybody - even if they have no earnings.

But, by my calculations, if you are a 40% taxpayer you might be better making contributions from company - unless you have relevant income to get the higher rate relief on. A search may prove fruitful because it has been done to death, what is best in any given situation depends upon what that situation is exactly.