HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: pension contributions: multi-employer group schemes - investment business

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

As in CTM08344, establishing whether contributions in respect of multi-employer schemes are expenses of management may require a consideration of all the facts and establishing what was the company’s purpose/intention in making the payment or taking on a liability. However the circumstances in which no deduction is due are likely to be very rare (CTM08347/CTM08348). The following factors may be important.

  • Is the liability that of the company making the payment or of another sponsoring employer of the group pension scheme?
  • Does it relate to current employees or orphan employees?
  • How were any orphan liabilities created?
  • Were liabilities of another company transferred or guaranteed in connection with the sale of that company, or some of its shares?
  • Were liabilities met or guaranteed as part of an agreement with the Pensions Regulator and the pension scheme trustees to address a PA95/S75 debt (Approved Withdrawal Arrangement, CTM08354)?
  • Was the payment voluntary?

If the expenditure is paid in respect of the paying company’s investment business then it can get relief for management expenses, even if there is also some other purpose or some incidental benefit to another party, e.g. fellow group company. The purpose will be a question of fact.

In a multi-employer scheme there are specific issues to be taken into account in considering whether a contribution met or guaranteed by one company on behalf of another, either by another sponsoring employer of a multi-employer scheme, or by an unrelated third party, is in respect of the paying company’s investment business.

In establishing the purpose(s) for the making of a contribution, bear in mind that in a multi-employer scheme, a company which is seen to be abandoning its own pensioners or those of a company associated with it could cause considerable damage to its reputation and to the morale of the continuing staff of both it and other group companies. The protection of its reputation and the morale of the staff will often be the purpose for funding the deficits or liabilities of other group members. Payments made for these reasons will be made in respect of the company’s investment business, even where there is an incidental benefit to a third party, and relief should therefore normally be given.


A group decides to sell off a discrete part of its business, involving a number of subsidiaries. This triggers a PA95/S75 debt for one of these subsidiaries amounting to some £45m, of which £31m relates to orphan liabilities. The group approach the pension scheme trustees who agree to an AWA (CTM08354) under which the parent company will pay the full £45m (thereby assuming the liability of the subsidiary). Enquiries reveal that the group are very concerned about adverse publicity, and make it plain that it would be inconceivable for them to walk away from a liability arising from a group wide deficit. The facts also show that the subsidiary did not have the resources to meet the payment itself. The sale documents are considered and do not connect the contribution to the sale, for example it is clear that the sale or indeed the sale price do not hinge on the contribution being made (though the pension liabilities/contributions etc may of course be mentioned). Relief is therefore available to the parent company (‘company with investment business’) for the whole amount.

See also CTM08348 re sale of a subsidiary.