Pension payments and making a loss in one tax year

[Danglekt]

the whole capitalist basis of our society is broken.

FTFY

[Cirrus]

(can never guarantee, even/especially with pensions)

You should be able to guarantee with a pension.

Markets go up and down but long term, investments must follow an upward trend. Obviously some things fall so you need to spread your risk intelligently but if the financial markets didn't give satisfactory returns overall then the whole capitalist basis of our society would be broken.

[SueEllen]

I still don't see the point of having a pension that you have to fund yourself. I mean, it's OK if you have a decent permie job where the employer contributes to the pension fund, but if you're funding it yourself as a self-employed person or Ltd Co director then aside from the tax break I don't see any benefit (having it 'invested' in a stock market fund is a benefit either...).

My reasons:
1. Tax
2. To stop me spending it

All pensions are is a savings wrapper, which due to their restrictions stops you spending the money when you are young when should be earning it instead.

[ChimpMaster]

I still don't see the point of having a pension that you have to fund yourself. I mean, it's OK if you have a decent permie job where the employer contributes to the pension fund, but if you're funding it yourself as a self-employed person or Ltd Co director then aside from the tax break I don't see any benefit (having it 'invested' in a stock market fund is a benefit either...).

Perhaps if I was 50 years old and had £200k sitting in my Co account, I would then see the benefit of dropping it all into a pension, knowing that I could get at it in 5 years' time. But if you have to wait 15 or 20 years to get at most of your money, then you're wasting your best years waiting to cash out at death's door.

BTW I have other plans in place that will hopefully (can never guarantee, even/especially with pensions) fund us well through retirement.

[Cirrus]

My accountant tells me it's alright unless you look like you are not trading, so he wants me to do a little bit of turnover for the current year.

When you are looking at this area, separate company law from tax law. Companies have obligations to suppliers etc which can be adversely affected by handing out money that may not be there. With regards to HMRC, they seem to want dividends to come out of post-CT profits but those could be from previous years which could mean the company goes into loss for the year in question.

[Contreras]

You would hope so seems they do different jobs.

Actually you would hope they took a similar position re the tax legalities.

I attended an IFA presentation (PCG event) where the speaker was making great play of how he had helped a couple of contractors dump £200k each into pension schemes by using up previous year's unused allowances (and an immediate tax-free lump sum withdrawal). I tried to challenge him about about the CT loss aspect but he was more interested in collecting contact details from other contractors at the event.

There is at least one pensions thread on here (perhaps one the OP linked to) where IFA advice was similarly at odds with that of NW.

I know who's opinion I would trust btw.

Now I come to think of it, I was including dividend payments in my expenses calculation, which I think is wrong. When I exclude them I think I may not be making a loss for the year after all.

Dividends come from post tax profit. There's a clue there, definitely speak to your accountant about this.

[Barracuda]

Now I come to think of it, I was including dividend payments in my expenses calculation, which I think is wrong. When I exclude them I think I may not be making a loss for the year after all.

[Barracuda]

You would hope so seems they do different jobs.

Well I wonder which one is correct then

[northernladuk]

Hi Contreras, what do you mean they will tell me "no problem". IFAs think differently to accountants?

You would hope so seems they do different jobs.

[Barracuda]

Or ask an IFA, they will tell you 'no problem'.

Hi Contreras, what do you mean they will tell me "no problem". IFAs think differently to accountants?

[Contreras]

Or ask an IFA, they will tell you 'no problem'.

[SueEllen]

The only clear advice comes from Craig@Nixonwilliams but it's from 2014. He's says not to do it so it would be worth asking your own accountant their view.

[Barracuda]

By the way, I have read a number of relevant threads on the message boards (see below) but it's still not clear to me how this works around the margins, especially when the tax year's loss will be small

Some other relevant posts:

http://forums.contractoruk.com/accou...y-pension.html

http://forums.contractoruk.com/accou...allowed-3.html

http://forums.contractoruk.com/accou...on-fund-2.html

http://forums.contractoruk.com/accou...-advice-2.html

[Barracuda]

My company had an income in 2014/15 and will in 2015/16 as well.

I made a pension payment to my personal pension fund in June 2015 intended to be in respect of work performed in 2014/15. I would like to make another pension payment to myself now, in respect of work performed in 2015/16.

This second payment may mean that the company makes a small loss for 2015/16, although 2014/15 and 2015/16 taken together will show a substantial profit.

I have read that one shouldn't make payments that take the company into loss for a year because HMRC may refuse to offset them against tax. I can't see the logic in this though, since I was just making a remuneration payment that was slightly delayed (my pension payment in June 2015 missed the end of the tax year by just a few of months).

Can anyone say any more about this? Does it sound like in my case going into a small loss would be OK, or is that to be avoided at all costs?