Self Employed Pensions (and tax) query - is this ok to do - Genuinely unsure

Mick70

Afternoon all,  genuinely unsure if this is ok to do.
Wife, part time self employed, is a low earner and turnover probably about £12.5k pa , various expenses that are allowed and this normally brings profit down to say £8.5k.
I am aware from a pensions viewpoint this means she can only pay into the pension £6800  , this creates govt relief of £1700 , giving total of £8500 (cannot be more than earnings/profit).

My question is this,  can i ignore the expenses that she can offset , hence her profit would then be £12.5k  ?    I realise this will mean paying more NI but it isnt much.
I assume this is not wrong to do and it is up to me if I offset these running costs/expenses or not .   Meaning I can then pay more into her pension ,  £10k payment say, creating govt relief of £2500 , giving total into pension of £12.5k  
IF this is ok, I am assuming i need to get this payment made into her pension before the end of March this year ?

thanks in advance,
Mick

Dazed_and_C0nfused

She has until 5 April 2021 not the end of March 2021 to make a pension contribution for the 2020:21 tax year.

But it sounds like you are proposing your wife deliberately files an incorrect return?

Mick70

that is what i am asking , genuinely don't know, is it a false return by not offsetting expenses ?  If it is then I wont be doing it , honestly was not sure 

Secret2ndAccount

All references on the gov.uk website use the term 'you can deduct', not 'you must deduct'. Looking at the Tax Manual, which is normally the final word, the term repeatedly used is 'Allowable Expenses', not 'Compulsory Expenses'.

I can find no specific statement that you must claim all allowable expenses. There is a complex list of rules about what you can and can't claim for. Saying that you must claim all allowable expenses would risk putting the average person in a squeeze between having to claim every penny of allowable expenses, while not claiming one penny from the list of exclusions. Therefore I would assume that the small sole trader has the discretion not to claim an expense if they so wish.

The only parts of the manual I could find that might suggest the opposite were some which said things like 'Your profits are the difference between your takings and your allowable expenses' - kind of presuming you would deduct expenses. Not explicitly stating you must deduct expenses, but implicitly assuming that you would.

Your call. Given the small sums involved you are unlikely to find yourself hauled over the coals for it either way.

Mick70

yes, it is hard to determine if this is bad practice or ok to do, it was a genuine question , tried google and cant find anything to help, unsure if other sole traders do this 

Albermarle

How about just reducing the expenses , probably some could be debatable anyway .

Marcon

Dazed_and_C0nfused said:

She has until 5 April 2021 not the end of March 2021 to make a pension contribution for the 2020:21 tax year.

But it sounds like you are proposing your wife deliberately files an incorrect return?

1 April this year, because 2 and 5 April are Easter bank holidays.

HMRC is concerned with people who deduct expenses when they shouldn't. I don't think they will be too bothered about someone deciding not to deduct expenses! The amounts involved are too small to be fussed about. 

Brynsam

Mick70 said:

yes, it is hard to determine if this is bad practice or ok to do, it was a genuine question , tried google and cant find anything to help, unsure if other sole traders do this 

I wouldn't worry too much. You are in an unusual situation so it's no surprise googling hasn't helped. As pointed out above, these are small beer whichever route you go. Can you really see HMRC complaining that your wife hasn't deducted enough expenses?

HHarry

This link suggests that there is a requirement to record expenses as part of your business.
https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch11300

The chances of getting caught and the sums involved may be small, but you are submitting inaccurate information for your own personal gain, which I think HMRC would care about.

payless

Before you under declare expenses ( no one is going to question this...) allow you may be asked why not claiming trading allowance instead, although again not obligatory).  .  look at https://www.gov.uk/guidance/check-if-you-have-unused-annual-allowances-on-your-pension-savings