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SIPP payment

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Barry_Bear
Barry_Bear Posts: 212 Forumite
100 Posts Second Anniversary Name Dropper
Is there any limit to the amount that a company can pay into a SIPP in any one year?
Does the director have to take a salary as income for the company to make a SIPP payment or does the requirement that pension contributions must not exceed salary taxable income only apply to personal pension contributions?
Does a company contribution to a SIPP get an automatic 20% tax relief top-up at the basic tax rate, or does that only apply to personal pension contributions?
Anything to watch out for, any reasons a company pension contribution may not be a good idea?

Comments

  • Brynsam
    Brynsam Posts: 3,643 Forumite
    Fifth Anniversary 1,000 Posts Name Dropper Combo Breaker
    Worth refreshing your memory and having a look at the answers when you asked a similar question a few months ago: https://forums.moneysavingexpert.com/discussion/6145462/director-pension#latest
  • Barry_Bear
    Barry_Bear Posts: 212 Forumite
    100 Posts Second Anniversary Name Dropper
    edited 27 October 2020 at 3:23PM
    Thanks Brynsam. Yes some of this was covered but a clarification on a couple of points would be appreciated, specifically:

    A company SIPP contribution attracts corporation tax relief, but does the company contribution into the director's SIPP also get an automatic 20% tax relief top-up at the basic tax rate as well, or does that only apply to personal pension contributions?

    Also, can the company make a director's SIPP contribution out of previous years accumulated profits in the reserves, and if yes, does the company get corporation tax relief on this amount. For example, say the company only made £10,000 profit in the current year, but has profit reserves of £150,000. Can the company make a director's SIPP contribution of £40,000 (or even £120,000 if carrying forward 2 previous years unused allowances) and would the company get a corporation tax rebate on the contributions (at 19% corporation tax a rebate of £7,600 on £40,000 or £22,800 rebate on £120,000)?


  • dunstonh
    dunstonh Posts: 119,685 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    A company SIPP contribution attracts corporation tax relief, but does the company contribution into the director's SIPP also get an automatic 20% tax relief top-up at the basic tax rate as well, or does that only apply to personal pension contributions?

    Personal contributions do not get a top up. The personal contribution gets a relief.  This is to recover the tax already paid during payroll. 

    Company contributions have not paid tax so there is no relief required.   They are a business expense that reduces the corporation tax due.

    Also, can the company make a director's SIPP contribution out of previous years accumulated profits in the reserves, and if yes, does the company get corporation tax relief on this amount. 

    Yes as long as the carry forward rules are met.  and no, there is no tax relief (as per above) but it does remain a business expense that will reduce CT.


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Thanks dunstonh
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