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Taking a SIPP

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03 December 2008
Issue: 4187 / Categories: Forum & Feedback
A company wishes to use its substantial cash reserves to fund a self invested personal pension scheme for the directors, but will this payment be allowed as 'wholly and exclusively' for trading purposes? The replies examine HMRC's instructions on this subject and conclude that there is likely to be an entitlement to relief.

I act for a private limited company which has built up cash reserves of about £300 000 and is generating annual profits in the region of £200 000. It occurs to me that a good use of these funds would be for the company to set up a self invested personal pension (SIPP) with the directors as members and for a large contribution to then be made and relieved against the trading profit.

The potential problem that I see is that the Inspector of Taxes may attempt to disallow the contribution as not being made wholly and exclusively for trading purposes under TA 1988 s 74(1)(a). Do readers have any experience of HMRC's attitude to such contributions in these circumstances? It may be worth stating that the company only has two shareholders and directors.

Query 17 317 — Unfunded.

Reply by Exile:

The changes in legislation from FA...

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