Pension Contributions

[Craig@Clarity]

I always thought that there was some sort of extra relief for a company to pay it? Or is it just that they won't be paying Corp Tax on the amount as it wouldn't be counted towards profits?

It's usually treated as deductible for CT so whatever you contribute towards a pension from the company, you save 20% CT.

[Fred Bloggs]

It's usually treated as deductible for CT so whatever you contribute towards a pension from the company, you save 20% CT.

And it leaves your divis and salary in your pocket to do with as you please plus the IR35 proofing that I mentioned above. To me, making Ltd Co contributions into a SIPP is about the most valuable thing you have working as a Ltd Co contractor. Make the best of it while it lasts!

[lje]

If you pay your pension from the company you have no corporation tax to pay on it. If you took the money out of the company as extra salary (so that you could pay it later into pension) you would obviously have extra NI costs (employee and employer). If you take it out as dividends and then pay it into pension it doesn't really make much difference to the tax you would pay.

I pay myself a salary of £15k and put £2k/month into pension (ie £24k pa). If I paid this pension money personally then I would be limited to £15k (assuming that I take the pension money out of the company as dicidends).

[lje]

And it leaves your divis and salary in your pocket to do with as you please plus the IR35 proofing that I mentioned above. To me, making Ltd Co contributions into a SIPP is about the most valuable thing you have working as a Ltd Co contractor. Make the best of it while it lasts!

Good point. If in the future anyone argues that you were caught by IR35 then your company pension contributions would be subtracted from revenue before the rest of the calculation takes place - it is accepted as a cost of sale.

[gizzmo]

Retrospective contributions?

Hi there

I am fairly new to contracting, just completed my first year and been learning all about the tax free allowances with the help of my accountant.

I am curious to know whether Pension contributions can be made retrospectovely or whether they have to actually have been physically paid into the pension during the tax year applicable?

The reason being that my company tax year ended Mar 2011 - and in that year the pension contribution maximum was £255k. However I only paid a fraction of that into my pension, and now have a large amount of profit left over on which I will have to pay corporation tax on (by Dec 2011). Can I decide to pay more into my pension for that tax year and therefore reduce my corporation tax bill now? Or have I effectively missed the boat, and am now limited to the £50k per year from here onwards?

Thanks for your help in advance.
gizzmo

[centurian]

I always thought there was no advantage to getting company to pay your pension contribs?

Outside IR35 - minute difference

Inside IR35 - massive difference


If outside IR35, any contributions you did make will be taken into account should you lose an IR35 case.

[ASB]

Hi there

I am fairly new to contracting, just completed my first year and been learning all about the tax free allowances with the help of my accountant.

I am curious to know whether Pension contributions can be made retrospectovely or whether they have to actually have been physically paid into the pension during the tax year applicable?

The reason being that my company tax year ended Mar 2011 - and in that year the pension contribution maximum was £255k. However I only paid a fraction of that into my pension, and now have a large amount of profit left over on which I will have to pay corporation tax on (by Dec 2011). Can I decide to pay more into my pension for that tax year and therefore reduce my corporation tax bill now? Or have I effectively missed the boat, and am now limited to the £50k per year from here onwards?

Thanks for your help in advance.
gizzmo

There are some limited carry back facilities but the rules have been tightened recently. Hmrc site will have them. Other than that you will be limited to the 50k. If you are making that size of contributions consider carefully the lifetime limit too.

[jmo21]

If outside IR35, any contributions you did make will be taken into account should you lose an IR35 case.

What do you mean should be "taken into account"?

Like the poster 2 before you, pension contribs are effectively IR35 proof should you lose an IR35 case.

[lje]

There are some limited carry back facilities but the rules have been tightened recently. Hmrc site will have them. Other than that you will be limited to the 50k. If you are making that size of contributions consider carefully the lifetime limit too.

You can carry forward allowances from the last 3 years.

Details here.

[v5srv]

What do you mean should be "taken into account"?

Like the poster 2 before you, pension contribs are effectively IR35 proof should you lose an IR35 case.

Presumably because when outside IR35 you get 20% corporation tax "relief" on the contributions but if caught in IR35 that same pension contribution would probably have attracted relief at higher rate tax (40%). So this extra relief will go a small way to offsetting what they claim you owe.