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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My client trades as a small ltd co. He is the sole emplyee/director.

Resolved Question:

My client trades as a small ltd co. He is the sole emplyee/director. He has not taken a wage & does not propose to do so this year.
Can he put an amount into a pension as a "salary sacrafice" with paying a wage to himself?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Does your client have a PAYE scheme in place?
Customer: replied 2 years ago.

Not presently , he was waiting until after 5th April

Cheers

Expert:  TonyTax replied 2 years ago.
Hi.

There is nothing theoretically to stop your client doing what he wishes to do. A company pension contribution will qualify as a deductible expense so long as it is made "wholly and exclusively" for the purposes of the business. Usually, there is only a problem if the sum of salary, benefits and pension contributions is deemed to be excessive for the work done. Taking no salary can hardly be seen as excessive, albeit unusual. It would be preferable, however, if he had a small monthly salary but it isn't a pre-requisite. Many sole directors take dividends as their main source of income these days because of the ludicrously high level of NICs.

Take a look here for HMRC material on pension schemes, BIM46030 and BIM46035 in particular. There is information on salary sacrifice here. There is some third party commentary here.

I hope this helps but let me know if you have any further questions.
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