SIPP payments from LtdCo

[diesel]

At present i am paying privately into my HL SIPP. However, my accountant suggests i should pay my contributions from my Bus bank account. If so what are the benefits? And is it worth doing or will HMRC take a -ve view?

[pmeswani]

At present i am paying privately into my HL SIPP. However, my accountant suggests i should pay my contributions from my Bus bank account. If so what are the benefits? And is it worth doing or will HMRC take a -ve view?

Up until the changes in the CT rates, you would save the 21% on Corp Tax, now it's 20%. I would make contributions from both personal and Business bank account, as with personal, you will get the Govt. to contribute 20% and the Business savings on CT will be 20%. But the contributions must be from profits. HMRC won't take a negative view as they don't contribute from a company contributions, unless a) You are inside IR35 and / or b) you are contribution outside the profits of your business.

HTH

[Bradley]

I may be misinterpreting you but ...

But the contributions must be from profits. HMRC won't take a negative view as they don't contribute from a company contributions, unless a) You are inside IR35 and / or b) you are contribution outside the profits of your business.
HTH

You can of course make a loss and still get the company to make SIPP payments; whether you've got the cash to do it is another matter.

I'd get the company to pay the contributions to the SIPP. After all, paying them personally means taking them from the company and presumably paying income tax and/or national insurance.

If you are a shareholder and a director then HMRC will not challenge the deductibility of the contribution from chargeable profits.

Remember that there is now a £50k annual limit on contributions that receive tax relief.

[diesel]

thanks for replies.
i am only company director. I doubt i will pay more than the £50k annual allowance. I was only looking at paying around £200/mth and pay some extra from personal account as top up.

is there any actual benefit? as personal payments get tax relief, but payments from Ltd co will only save on corp tax......hence cant see what the benefit is? if anyone can enlighten please

[Moscow Mule]

if anyone can enlighten please

You pay income tax on the personal contributions, (which get put into the pension by HMRC, but may not be at the same rate you paid). For you to get that income, yourco will have had to have a profit to declare a dividend (unless you are full PAYE / IR35 caught), so will have already paid corp tax on that money.

You get the corporation tax back on the company pension contribs but no personal relief.

You'd have to do the maths for you circumstances to work out which option saves you/yourco most.

[IR35 Avoider]

You can get the first aprox. £7000 per year of salary tax free. Since your living expenses that are a greater priority than contributing to your pension are likely to more than use that up, it is sensible to regard your personal contributions as being made from income that is taxed at the basic or higher rates. The tax savings from an employer contribution will always be equal or better than the tax savings on a personal contribution that isn't paid from tax-free income. (Remember dividends aren't tax-free, even if no higher-rate tax is due on them. You've paid corporation tax on them.)

Employer contributions have the additional advantage that that money is immunised from IR35. Contributions paid out of "dividends" could (perhaps years later) become contributions out of deemed salary on which you now owe NI.

[centurian]

Makes a big difference if you are inside IR35 - as the payments come out before employers NI is calculated.

If outside IR35, the difference at the end of the day is less. But worth doing anyway, if only to reduce your exposure in the case of an IR35 investigation as any pension payments you did make from the company would reduce the NI bill.