Pension conundrum

12 April 2011

Issue: 4300 / Categories: Forum & Feedback

The sole director and shareholder of a limited company takes £160,000 from his company by way of dividend and salary. He pays pension premiums of £9,000 p.a. but the company has paid a single premium of £100,000

My client runs a successful company business with profits in the region of £400 000. He pays himself a modest salary and withdraws surplus monies by way of dividend after due consideration of the need to retain some funds in the business for prudence. His income in 2010/11 will be approximately £160 000.

He pays (privately) annual personal pension payments (gross) of £9 000. An independent financial adviser recently persuaded the company to pay a single pension premium into a new company pension scheme of £100 000 in the accounts year ended 31 December 2010.

Will this be allowable for corporation tax and how will any tax due under the forestalling provisions be calculated?

Query 17 777 – Mike

Reply from The Snark

Let’s do the simple bit first. The company is stated to be successful with profits of £400 000....

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