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In the HMRC pension manual it indicates that pension contributions

Customer Question

In the HMRC pension manual it indicates that pension contributions are a deductible against corporation tax on a ‘paid’ basis. However there is no definitive answer to what a paid basis is.

If a pension contribution to a registered pension scheme was made well within the end of the fiscal year, and the pension provider has provided documentation to confirm the premium was also paid. In addition they have invested the funds, and commenced the policy.

Nonetheless, if the funds do not clear by the end of the fiscal year, will the contribution be deductible as an expense in the year it was paid and implemented by the pension provider, or the year it was cleared?

There seems some speculation on this that paid means cleared, or at the point it was paid to the provider the same as when HMRC receive payment for tax. Having contacted HMRC two individuals in the pensions departments, and one in corporation tax helpline indicate as payment was received before the end of the year it should be deductible. Please help.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

This is one of the rare occasions I concur with the views expressed by the three HMRC staff with whom you have consulted! Once the company has issued the payment it can be posted to the appropriate ledger heading and brought to account at the year end, thus being tax deductible. It's the classic 'Cheque's in the post Sir, honest!'

I am so pleased to be able to impart such good news.
Customer: replied 3 years ago.

Hi Keith,


Thanks for your quick response. Just to clarify as in the above scenario the company had paid the cheque well before year end, and was also received and deemed to be paid by year end via the insurance company (not just in the post). So therefore you would also agree this was deemed to be paid even though the funds had not left their account by year end?


 


I appreciate your response. Thanks again.


Andrew

Expert:  bigduckontax replied 3 years ago.
Yes, Andrew, totally agree; it's tax deductible. I am surprised anyone thought to the contrary.
bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.

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