Can I make monthly pension payments from my dormant limited company into a SIPP?

cmonwigan

My Ltd company has been dormant since February 2020 when I took a full-time job. 
I have continued paying monthly into my SIPP via company retained profits of £100k.  All outstanding Corporation and VAT has been paid.
I have also taken one £2k dividend during this tax year.
I've been told by a colleague at work that HMRC do not allow company pension contributions from a dormant company, and furthermore I also shouldn't have taken a £2k dividend.   
I've googled and the answer doesn't appear to be conclusive either way.
Any guidance gratefully received. 



  

dunstonh

I've been told by a colleague at work that HMRC do not allow company pension contributions from a dormant company, and furthermore I also shouldn't have taken a £2k dividend.

The term dormant has a specific meaning.  So, when you say dormant, do you mean it in the proper sense (i.e. registered at companies house as dormant) or just an indication that it has stopped trading.

The response will depend on your explanation.

cmonwigan

Stopped trading.

The accountant advised that the company is now non-trading. 

cmonwigan

To be 100% transparent - on the Companies House website, the Ltd company is considered "Active".

dunstonh

Ok, so its not dormant.
Pension contributions have to come from earnings by way of trade.  So, if the money in the company is from profit from trade then making a pension contribution is not an issue on that point (in isolation of other things that may block it from being possible).
e.g. if the money in the business is from a sales of business premises as you are no longer trading and that sale generated a profit, you could not use that to pay into a pension as it's not by way of trade.
However, there are issues.     You don't get tax relief on an employer contribution.    It reduces your corporation tax.   If you are not trading then you may not have any corporation tax to reduce.   So, it may not be feasible to pay it into the pension, even if it's possible.  It may be possible to still do it and get corporation tax reductions via the accountant using accountancy methods to shift profits/losses.  The accountant can advise on the possibility of doing that or not.

In respect of the dividends, that is not an issue as you are not dormant.  Just not trading.  Indeed, many shareholding directors of "own" company will keep the company open for many years after it stopped trading to draw the money in the business out over a period to reduce their tax bill.

cmonwigan

Thank you for taking the time to explain this, it's really helpful.
The money in the business is retained profit, over the 8 years that I was actively trading. I think I need to make sure the accountant is on the ball and fully aware of my circumstances. 

Brynsam

dunstonh said:

I've been told by a colleague at work that HMRC do not allow company pension contributions from a dormant company, and furthermore I also shouldn't have taken a £2k dividend.

The term dormant has a specific meaning.  So, when you say dormant, do you mean it in the proper sense (i.e. registered at companies house as dormant) or just an indication that it has stopped trading.

Companies House has a fairly rigorous definition of 'dormant' - it refers to a company which has had 'no significant entries in its books of account' during the year in question.