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Previously on "Pension creating a trading loss for the year"

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  • cwah
    replied
    damn lazy accountant!

    Leave a comment:


  • Paralytic
    replied
    Originally posted by geoffreywhereveryoumaybe View Post
    According to my accountant: You must also ensure that the sum of any contributions made doesn’t cause the company to make a trading loss for the period (company expenses exceeding any income generated), and this would be in reference to the company accounting period, which spans May to April.
    Please ask your accountant to point you to the guidance that reflects this, and then post it here.

    I suspect they just don't want the (tiny) bit of extra work if means for them.

    Leave a comment:


  • eek
    replied
    Originally posted by geoffreywhereveryoumaybe View Post
    According to my accountant: You must also ensure that the sum of any contributions made doesn’t cause the company to make a trading loss for the period (company expenses exceeding any income generated), and this would be in reference to the company accounting period, which spans May to April.
    Why? Companies make a loss all the time and eat into reserves..

    Leave a comment:


  • geoffreywhereveryoumaybe
    replied
    Originally posted by eek View Post
    Yes, why wouldn't you be able to?
    According to my accountant: You must also ensure that the sum of any contributions made doesn’t cause the company to make a trading loss for the period (company expenses exceeding any income generated), and this would be in reference to the company accounting period, which spans May to April.

    Leave a comment:


  • eek
    replied
    Originally posted by geoffreywhereveryoumaybe View Post
    I find myself in the same situation - a healthy company operating profit even if I utilise the £40 maximum payment into my personal pension.

    I have been making company contributions to may personal pension over the last few years but not up to the maximum so there is a shortfall that I could take advantage of.

    So my question would be can I make pension contributions or even dividend payments out of accrued company profit rather than operating profit?
    Yes, why wouldn't you be able to?

    Leave a comment:


  • geoffreywhereveryoumaybe
    replied
    In the same boat

    I find myself in the same situation - a healthy company operating profit even if I utilise the £40 maximum payment into my personal pension.

    I have been making company contributions to may personal pension over the last few years but not up to the maximum so there is a shortfall that I could take advantage of.

    So my question would be can I make pension contributions or even dividend payments out of accrued company profit rather than operating profit?

    Leave a comment:


  • Paralytic
    replied
    Originally posted by rascal View Post
    I'm going through the same process at the moment, trying to calculate how much my company can contribute. Accountant has advised that it cannot create a trading loss for the accounting period, otherwise it will not be exempt from CT and HMRC may look into it and charge a penalty.

    You can take your chances, or play it safe ... I'm playing it safe.
    It would also create extra work for the accountant....

    I'd be asking for links to the guidance that states this is not allowed.

    Leave a comment:


  • rascal
    replied
    I'm going through the same process at the moment, trying to calculate how much my company can contribute. Accountant has advised that it cannot create a trading loss for the accounting period, otherwise it will not be exempt from CT and HMRC may look into it and charge a penalty.

    You can take your chances, or play it safe ... I'm playing it safe.

    Leave a comment:


  • Cirrus
    replied
    Originally posted by ian2013 View Post
    Hi,
    What was your final resolution to the problem? Did you manage to make the pension contribution and claim back CT? I'm in a very similar situation now, and would like to know your solution.

    Ian


    I did exactly that - made a big loss because of putting the maximum 3 years allowance into a SIPP.

    You'll never guess what the Revenue did.

    They put a massive CT rebate into my bank account.
    HTH

    Leave a comment:


  • ian2013
    replied
    Originally posted by Delboypass View Post
    Thanks

    I have read extensively,done a few searches and spoken to accountants.

    Just looking to see if any accountants on here or anyone able to point to a specific GOV document saying, yes, legitimate. This is the part I am missing.

    I cant see a thread or article that says yes taking a pension can cause a legitimate trading loss and CT claw back or anyone who has been given a slapped paw by the HMRC.
    Hi,
    What was your final resolution to the problem? Did you manage to make the pension contribution and claim back CT? I'm in a very similar situation now, and would like to know your solution.

    Ian

    Leave a comment:


  • Cirrus
    replied
    Originally posted by Hobosapien View Post
    Was that following advice from an accountant?
    Of course

    If yes are they liable for any fines? If no are you worried about any future clawback and penalties if HMRC review your accounts in more detail?
    Company now dissolved.

    [When you set out in your car, your basic assumption is you won't have a serious accident. The chances are very low. When you start contracting, the assumption is you won't have the Revenue poking around in your affairs. It happened to me once in over 30 years, and they just took a few grand. I don't know what for. It was just a cost of doing business.]

    HMRC are only concerned whether you pay the right amount of tax. Pension contributions are an accepted tax-free cash stream, so I can't think why you or your accountant think there is a problem. Go to an IFA if you still have worries.

    Leave a comment:


  • WordIsBond
    replied
    Legislation on carry back of losses for corporation tax: https://www.legislation.gov.uk/ukpga...-total-profits

    Makes no mention of whether or not the loss is due to pension contributions.

    HMRC guidance: https://www.gov.uk/guidance/corporat...laiming-a-loss

    Again, no mention of whether or not the loss is due to pension contributions.

    Short answer, there is nothing in legislation that excludes losses from pension contributions from being carried back.

    The bigger question is whether or not they constitute trading losses. Some discussion with different viewpoints here: https://forums.contractoruk.com/acco...y-pension.html

    In general, I almost always am persuaded by Jessica's responses. In this case, I'm not as sure.

    I'd decide it this way: Is this a retained earnings dump, or is it deferred pension contributions that you should have been making all along, and you are just now catching up on them? If the former, it really isn't a trading loss. If the latter, I'd argue it is.

    If only you had minutes from board meetings year on year that you had filed with your accountant at the time, detailing that pension contributions due to the director were accruing and needed to be paid eventually. That would make it easy to claim this was just catching up and is a trading loss.

    The fact that you are still trading in the current year probably helps you. The fact that you are looking to close the company down probably hurts you.

    But it's an interpretation thing, and the chances of HMRC pursuing it probably aren't very high.

    But whoever told you there's a fine for making the pension contribution should be asked to prove it. I don't know of any fine for that. The only question is whether or not you can carry back the loss for reclaiming corporation tax. You certainly can make the contribution and take the loss but not try to carry back the loss.

    NOTE: If you decide to go for this, might as well be shot for a sheep as for a lamb. Consider Terminal Loss Relief: https://www.gov.uk/guidance/corporat...-income-losses. If you go for that, come back and let us know how it went.

    Leave a comment:


  • Delboypass
    replied
    Originally posted by northernladuk View Post
    There are a ton of threads covering pension losses on forums already. Might be worth a read to see if your answer is in there. Could also be other stuff you've not considered as well.

    https://www.bing.com/search?q=pensio...d=&adlt=strict
    Thanks

    I have read extensively,done a few searches and spoken to accountants.

    Just looking to see if any accountants on here or anyone able to point to a specific GOV document saying, yes, legitimate. This is the part I am missing.

    I cant see a thread or article that says yes taking a pension can cause a legitimate trading loss and CT claw back or anyone who has been given a slapped paw by the HMRC.

    Leave a comment:


  • northernladuk
    replied
    There are a ton of threads covering pension losses on forums already. Might be worth a read to see if your answer is in there. Could also be other stuff you've not considered as well.

    https://www.bing.com/search?q=pensio...d=&adlt=strict

    Leave a comment:


  • Delboypass
    replied
    Apologies - missed that part - yes I already have a pension open - just didnt use it for many years stupidly.

    I was more concerned about the trading year limitation and trying to claw back the £160k, CT rebate & taking company into a loss for this trading year.

    Cirrus - your accountant was okay with this and you got CT rebate? What year was this you did it?

    Does anyone have any official Government literature that limited company can make a loss on pension contribution and get a CT rebate beyond the current trading year profits?

    Would be very appreciated.

    Accountant information - Nixon Williams (2 separate accountants):
    Thank you for sending this through. As far as we are aware you can only carry back/forward trading losses providing that your company has a genuine trading loss. Putting into your personal pension from the company would not count as a genuine trading loss.

    I have checked and if you were to pay into your pension from the company and it made your company have a loss you would not get the any relief for the year on the part that took your company into the loss position. You would basically end up with no corporation tax to pay for the year, however, you are unable to reclaim any relief for the previous years or carry forward any relief from the contribution.

    You can only put into your pension, providing this was set up during the tax years you wish to use the unallocated allowances. You will not receive any rebate for corporation tax, as based on the current financial year your company would make a tax loss based on the amount you want to contribute. This means that the contributions are not allowable for corporation tax relief.

    Corporation Tax relief is granted on these payments, provided that they are made ‘wholly and exclusively’ for the purpose of trade. HMRC will accept the contributions are for the purpose of trade if the overall remuneration package of the employee/director is reasonable and the contribution does not cause the company to make a tax loss in any given year. Therefore you could potentially reduce your corporation tax liability to zero. If you did decide to contribute more you would not receive any corporation tax refund and could potentially have a charge from HMRC for the amounts that take your company into a loss position.

    Leave a comment:

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