In some circumstances it may be possible for a company to create a trading loss by making a pension contribution and to obtain additional tax relief against years prior to the immediately preceding accounting year. Provided the company either paid corporation tax in the previous three accounting periods or will be paying it in subsequent periods, tax relief will be applied to the pension contributions as long as they are made ‘wholly and exclusively’ for the purposes of the trade. Pension contributions need to be paid before the end of the accounting period for this planning to be effective.

If you would like to discuss this matter further please do not hesitate to contact us.

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisers dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.

The 2009 Budget introduced the Government’s proposals to restrict higher rate tax relief on pension contributions from 6 April 2011. In the meantime, the Government introduced ‘anti-forestalling’ provisions, intended to stop excessive last-minute pension funding before the rules change in 2011. The pre-Budget Report announcement on 9 December 2009, extended the restrictions from 9 December 2009 so that anti-forestalling now includes anyone whose ‘relevant income’ is £130,000 or more (previously the relevant income threshold for anti-forestalling was £150,000).

From 6 April 2011, pension contributions from an employer will be taken into account in determining whether someone’s income is £150,000 or more. But anyone with income below £130,000, before employer contributions are taken into account, will not have their tax relief restricted. Although if this threshold is breached in either of the previous two tax years the anti-forestalling provisions will be triggered.

Assuming that relevant income for all three years is under £130,000, or can be kept below £130,000, there are a number of pension planning issues to be considered such as Salary Exchange, Maximising Personal Contributions & Employer Contributions. If you would like to discuss any of these matters further please do not hesitate to contact us.

(This article represents Stiles & Company Financial Services (Petersfield) Limited’ interpretation of the law and HMRC practice at this time. Tax assumptions are subject to statutory change and the value of any advantages depends upon your personal circumstances.)

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisers dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.