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HMRC internal manual

Company Taxation Manual

Corporation Tax: charitable donations relief: formerly charges on income: pensions to former employees - payments made before 16 March 2005

Where a company pays a pension to:

  • a former employee, or
  • the spouse or other dependant of a deceased employee,

the payments are normally allowable as a deduction in computing profits (BIM46001). If the payments are not so allowable and they are annual payments, do not regard them as inadmissible as charges on income solely because they are in respect of past services. In practice, if the payments are:

  • reasonable in amount with regard to the nature and duration of the employee’s services, and
  • not inadmissible on other grounds,

they may be treated as a charge on income. However, such payments made on or after 16 March 2005 are not allowable as charges in any event - see CTM09010.

Guidance on excessive pensions etc paid to participators or associates of participators by close companies is at CTM60670 to CTM60690.