Limited company director pension question

System

Terron wrote: »

Directors of a company are employed by the company.

They can be, but do not have to be. They are office holders, not employees, unless they also hold a salaried position in the company.

Marcon

drumtochty wrote: »

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[FONT=&quot]For those who have said you cannot pay the amounts gross to pensions from the Ltd company or you must pay yourselves a wages from the pension You can't pay wages from a pension schemefirst please advise the specific HMRC regulation that demands this.[/FONT]

See https://www.gov.uk/employment-status/office-holder

Being a PAYE employee (however modest the salary) makes it hard for HMRC to dispute that the directors are employees - and thus pension contributions (provided they are 'proportionate to the role they play') become an allowable expense for corporation tax purposes.

Dox

bakescakes wrote: »

employee contributions for the pension are not a company expense but the expense of the individual director.

Therefore either they have to be treated as salary or dividends. I imagine in this case the payment should be regarded by the company as effectively a dividend payment and should be noted in the records such to ensure that there is no problem with HMRC as to the treatment, i.e. is it a dividend. (Effectively what is happening is the company's giving you funds which were then investing in the company pension scheme).

The dividends are subject to tax on you personally.

Confused by your first two posts. Is post two the advice given by your accountant, or you speculating, or what?

If it's what your accountant has said, it is actually correct: employee contributions are indeed the expense of an individual director. If the company makes the payment direct to the pension provider (it shouldn't, but these things happen), then the payment could only be one of 2 things (if it is an employee contribution): salary or dividend.

It's hard to see why anyone would go such a complicated and tax inefficient route. Register your company for PAYE, pay yourself a small salary (to establish you are an employee rather than merely an office holder) and then the company can make pension contributions direct, but as an employer contribution with CT relief.

segovia

I pay lump sums directly from my Ltd Company to my pension to reduce my corporation tax liability. Your pension provider will (should) ask where the money is coming from if it is a personal contribution they will provide the tax relief on your contribution. If the payment is from the Ltd company account they will NOT give the tax relief. You can't have it twice.