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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Specific deductions: pension schemes: anti avoidance

S196A-S196L, S246A Finance Act 2004

The following measures are designed to deter the creation of devices which seek to generate a deduction for an employer’s contribution to an employer-financed retirement benefits scheme (see BIM46140) effectively ahead of the benefits being paid from it, contrary to the intent of the applicable legislation.

If the provision of benefits under a registered pension scheme is dependent upon benefits not being provided under an employer-financed retirement benefits scheme, then the relief for the contribution to the registered pension scheme is restricted.

If the transfer value of rights under a registered pension scheme is reduced because benefits are provided under an employer financed retirement benefits scheme then the relief for the contribution to the registered pension scheme is restricted.

See RPSM05102140 for further guidance on these two measures.

If the provision of benefits under an employer-financed retirement benefits scheme results in the reduction of benefits payable to an employee under a registered pension scheme, then the expense to the employer of providing the benefits under the employer-financed retirement benefits scheme is not an allowable deduction in arriving at the trade profits. Where relief for contributions to the registered pension scheme has already been restricted, however, this rule is disapplied to the extent of that restriction.

These are complicated measures but assistance can be sought from Specialist PT (Pension Scheme Services - Technical), at Fitz Roy House, Castle Meadow Road, Nottingham, NG2 1BG where necessary.

Employer asset-backed contributions

With effect from 29 November 2011, employers are not able to claim a deduction for a contribution to a registered pension scheme at the time of payment if the contribution is made using certain asset-backed contribution arrangements.

These are arrangements that allow an employer to use non-cash assets to underpin and/or act as a guarantee for regular income stream payments to the pension scheme. The arrangements do not usually result in the outright disposal of the asset to the scheme.

These are complicated provisions and detailed guidance is at http://www.hmrc.gov.uk/pensionschemes/abc-guidance.pdf.