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I act for a private limited company which has built up cash reserves of about £300 000 and is generating annual profits in the region of £200 000. It occurs to me that a good use of these funds would be for the company to set up a self invested personal pension (SIPP) with the directors as members and for a large contribution to then be made and relieved against the trading profit.
The potential problem that I see is that the Inspector of Taxes may attempt to disallow the contribution as not being made wholly and exclusively for trading purposes under TA 1988 s 74(1)(a). Do readers have any experience of HMRC's attitude to such contributions in these circumstances? It may be worth stating that the company only has two shareholders and directors.
Query 17 317 — Unfunded.
Reply by Exile:
The changes in legislation from FA...
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