Pension for 2nd Director / Employee Question

[TonyF]

What have others set up for their spouses?

My company pays into my pension every month and a smaller amount into my wife's pension every month.

[SueEllen]

Further to this point, I am just about to make my pension contributions for this year.

As I have other personal income I am going to put 8k in personally to get 2k in tax relief taking it to 10k

Then I was going to put in 10k from my business (which I understand I have to set up a bank to bank transfer and let them know so they don't add in the tax relief) and I save some CT.

Question...

What's to stop me putting 10k down as pension payments in my accounts, but transferring the money directly to myself and then sending it to the pension fund where by default they'll add in 20% tax relief (thus saving my self CT and also sneakily getting some extra tax relief)

How would anyone know?

When HMRC decide to check your books for some other tax reason and you get caught perhaps?

People who commit fraud tend to do at least one stupid thing which means they get caught.

[MarillionFan]

Further to this point, I am just about to make my pension contributions for this year.

As I have other personal income I am going to put 8k in personally to get 2k in tax relief taking it to 10k

Then I was going to put in 10k from my business (which I understand I have to set up a bank to bank transfer and let them know so they don't add in the tax relief) and I save some CT.

Question...

What's to stop me putting 10k down as pension payments in my accounts, but transferring the money directly to myself and then sending it to the pension fund where by default they'll add in 20% tax relief (thus saving my self CT and also sneakily getting some extra tax relief)

How would anyone know?

[TheCyclingProgrammer]

OP - there’s no reason in theory why YourCo cannot make employer contributions to a SIPP or set up some other company pension scheme for all of its directors including your spouse.

The usual test will apply wrt whether or not the pension contributions are wholly and exclusively for business purposes though if the director has minimal involvement in the company and a small nominal salary it might be hard to justify maxing out the contributions up to the full £40k.

Just like a salary paid to a spouse director must be justifiable for the work they do, so must any other remuneration including pension contributions.

[TheCyclingProgrammer]

That's not true either.

Well, it’s half true. HMRC internal guidance is to set up a self assessment record for company directors so if they find you’re a director and aren’t registered they may set one up.

If that does happen (it’s not guaranteed, I don’t know if and how they cross check companies house records) and you receive a notice to file a tax return you are legally obliged to complete the return OR convince HMRC to withdraw the notice on the basis that you have no untaxed income.

As CoolCat says, good luck with the latter option. HMRC’s view is that director’s should do a tax return so they’d be unlikely to withdraw the notice IMO.

OTOH you are also correct that you have no obligation to notify HMRC and voluntarily register just because you’re a director and there’s no harm in waiting to see if HMRC contact you.

[northernladuk]

try telling the HMRC, they will issue one and once they do that you have to fill it in

That's not true either.

[CoolCat]

Not true.

Directors’ Tax Returns Not Compulsory - Contractor Weekly

try telling the HMRC, they will issue one and once they do that you have to fill it in

[northernladuk]

Director exemptions from automatic enrolment | The Pensions Regulator

Directors without an employment contract
If a director does not have an employment contract, they cannot be a worker and are therefore always exempt from automatic enrolment.

This means that an organisation with one or more directors who do not have contracts of employment is not an employer if it does not have any staff other than the director(s).

The company will have no automatic enrolment duties and does not need to complete a declaration of compliance. In this case they should let us know that they're not an employer.

If the organisation does have other staff, it has duties in respect of those other staff and is an employer. If none of the other staff meet the age and earnings criteria for automatic enrolment, the company still has to complete a declaration of compliance.

If the company's circumstances change so that automatic enrolment duties apply, they'll need to inform us of this as soon as possible. For example if they took on a member of staff other than a director, or if at least two directors started working for them under contracts of employment.

Or are you saying you want to set one up for her?

[CoolCat]

So we have rental income so she has to do an SA anyway. So basicaly as she's a Director, it's just the same for her as it is for me?

yes if she was neither a director or company secretary you would have to run a company scheme (and she would have to opt in or out) and lots of hassle would flow

since she is a director, she can setup a personal pension with a one quid initial contribution, and thereafter the company can make direct contributions to that pension (I do it with company cheques and appropriate form from the pension company)

good luck

[northernladuk]

the problem with setting her up as a director is she then has a mandatory tax return to fill in, which can be a lot of hassle if it would not otherwise be necessary

Not true.

Directors’ Tax Returns Not Compulsory - Contractor Weekly

[MarillionFan]

the problem with setting her up as a director is she then has a mandatory tax return to fill in, which can be a lot of hassle if it would not otherwise be necessary

but it does mean the rules about employee must be mandatory entered into company pension scheme do not apply, which is good as it gives you more options to play with

better option is to make her the company secretary then there is no mandatory tax return (although HMRC can always choose to ask for one anyway, this is unlikely) and she is still exempt from mandatory company pension scheme

as for voluntary pension scheme payments into her fund then biggest challenge is choosing a pension to pay into, with appropriately small charges, on that you need to do your homework, yes setup a new one

So we have rental income so she has to do an SA anyway. So basicaly as she's a Director, it's just the same for her as it is for me?

[CoolCat]

the problem with setting her up as a director is she then has a mandatory tax return to fill in, which can be a lot of hassle if it would not otherwise be necessary

but it does mean the rules about employee must be mandatory entered into company pension scheme do not apply, which is good as it gives you more options to play with

better option is to make her the company secretary then there is no mandatory tax return (although HMRC can always choose to ask for one anyway, this is unlikely) and she is still exempt from mandatory company pension scheme

as for voluntary pension scheme payments into her fund then biggest challenge is choosing a pension to pay into, with appropriately small charges, on that you need to do your homework, yes setup a new one, choose a good personal pension and the company can make contributions direct to it (meaning without it being hit by national insurance etc)

[MarillionFan]

Added the missus into the LTD company last year as a Director and had her set with a small salary because she does lots of important tulip in the company. Set up Class A & B shares, and because of her excellent work she sometimes get a dividend.

She has an old work pension from 10 years ago, but nothing at all these days.

In addition to my pension contributions which have been personal & to whit I am about to do from the Ltd, what should my accountant have advised me to do about her pension?

Do I need to enroll her in a pension? Could she just take out a new one and I start paying in?

What have others set up for their spouses?


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NLUK Anti Spam Note : The poster has not consulted his accountant as she is always busy and when asked always states 'we'll sort it out at the end of the financial year' comment

Anti Troll Note : Yes, I could have posted this in professional but then I would be unable to tell NLUK to fook off when he breaks the Anti Spam Note above.

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