Employer SIPP Payment - "Carry Forward Rule"

[Greenmantle]

Does anyone know if a company makes a payment today into a directors personal SIPP for a previous year (say 2023-2024) can they claim a refund against the Corporation Tax already paid for that year?

[SS2.]

AIUI, the CT deduction will be made from the period in which the payment was made, irrespective of any carry forward allowances the pension holder may have at their disposal.

[MaxFromage]

Pension payments by a limited company are only relieved on a cash basis. So they reduce the corporation tax in the year they are paid out, not adjusted/provided for.

Also bear in mind that when using carry forward rules (or indeed normal pension payments), you need to make sure they are a valid business expense, passing the 'wholly and exclusively' test; which more often than not relates to whether the total benefit package for a director is reasonable.

[Panamax]

MaxFromage said:

when using carry forward rules (or indeed normal pension payments), you need to make sure they are a valid business expense, passing the 'wholly and exclusively' test; which more often than not relates to whether the total benefit package for a director is reasonable.

I hadn't thought of that. Directors are often suppressing earnings to avoid NI but I see your point. Paying yourself a fat wedge and dumping a huge chunk of it into pension could be nicely efficient compared with receiving dividends. Interesting stuff.

[Jockman]

Panamax said:

I hadn't thought of that. Directors are often suppressing earnings to avoid NI but I see your point. Paying yourself a fat wedge and dumping a huge chunk of it into pension could be nicely efficient compared with receiving dividends. Interesting stuff.

Yes, up to £60k. Not the fattest of wedges nor the hugest of chunks but all very much appreciated.

Then, with April 2027 looming you make a decision if pensions are the wisest of vehicles for some to be investing in…..