The Importance Of Employer Pension Contributions
In owner managed businesses ...
POSTED BY HELEN BEAUMONT ON 22/02/2019 @ 8:00AM
I was talking to a new client on Monday about employer pension contributions and that prompted me to write this blog post ...
If you'd like to find out more about employer pension contributions then do give me a call!
copyright: vizafoto / 123rf
They can be an important part of the overall remuneration package of the owner-manager so it's worth considering them when deciding what to take out of your business. Remember, HMRC give you tax relief on expenses that are wholly and exclusively for a business purpose.
"Most employer pension contributions fall into the 'wholly and exclusively' category!"
They are part of the cost of employing staff, but do remember that they count towards the pension scheme member's annual allowance, are not taxable in that case, and are usually deductible expenses for the business.
HMRC could question whether they're deductible if an employee or director of the business is connected to the owner so be sure to check with your tax advisor if you employ a spouse or children in the business.
Of course, it is different for a controlling director who is the driving force behind their business. In this case, pension contributions can be accepted in the overall remuneration package. HMRC agrees that this is a commercial decision so are unlikely to consider a non-trade purpose to those contributions.
And it is very possible that shareholding directors of limited companies could receive pension funding that isn't available to their employees, especially if they only get dividends or a very small salary. Remember, total pension contributions must remain within their annual allowance so as not to incur a tax charge.
The tax relief is given to the business in the year which the employer pays the pension contribution as it is not usually possible to pay a contribution in one year and have it deducted in a different year's accounts. However, if said contributions generate or enhance a loss for the business, this can be carried forward and offset against a later year's profits.
"Would you like to know more?"
If you'd like to find out more about employer pension contributions then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.
Until next time ...
More about Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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