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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax: management expenses: pension contributions: introduction

FA04/S196 to FA04/S200

BIM46001+ sets out how an employer, former employer or other party which is a trading company is entitled to relief for contributions to a registered pension scheme. Broadly similar treatment will apply to companies with investment business to give relief as expenses of management. This guidance will necessarily repeat some of the BIM guidance as some issues are common to both trading companies and companies with investment business.

FA04/S196 to 200 apply to give relief for pension contributions for accounting periods ending on or after 6 April 2006. The legislation and the guidance that follows apply equally to Cross-Border schemes, i.e. schemes where some of the relevant employees are not in the UK. Specific provision for management expenses is at FA04/S196(3) and S199(2)(b).

Companies with investment business differ from trading companies. Most companies with investment business will be group holding companies and the majority of the employees involved in group schemes for which they are ‘employers’ will actually be employed by subsidiary or other group companies, The guidance on multi-employer schemes at CTM08352+ is therefore particularly relevant, but see also CTM08342 for the extended meaning of employer.

From April 2004 a ‘company with investment business’ within the meaning of ICTA88/S130 can also have a trade. It is a question of fact as to whether contributions to a pension scheme are for the purpose of the trade or in respect of the investment business and thus whether the contribution will qualify for a Case I deduction or as a management expense.

Guidance on other specific aspects of relief for contributions to registered pension schemes, e.g. ‘spreading’ provisions, can be found in the Registered Pension Schemes Manual at PTM043000+.

It must be stressed at the outset of this guidance that the circumstances in which relief for a pension contribution may not be due are very limited, though they will be set out in what follows. In each case the facts are absolutely crucial. The potential circumstances are itemised at CTM08344.

Where it is not obvious that relief is due, and after making enquiries and establishing the facts you consider that a contribution is not an expense of management, you should make a report to Pensions Technical Team, Fitz Roy House, Castle Meadow Road, Nottingham, NG2 1BD. before challenging it.