If there is a large increase in the level of employer contributions from one chargeable period to the next tax relief may be spread. Establishing if tax relief on an employer contribution to a registered pension scheme needs to be spread is a 4-stage process.
The period over which tax relief will be spread depends on the size of the relevant excess contribution. Tax relief on the excess contribution will be spread as follows
|Amount of relevant excess contributions
||Period of spreading of tax relief
|£500,000 or more but
less than £1,000,000.
|£1,000,000 or more
but less than £2,000,000.
|£2,000,000 or more.
Once a spread has been determined in accordance with the legislation it will not be varied. However an exception is made if an employer ceases to carry on business either
and the spreading of tax relief would mean that the employer
does not get full tax relief on the contribution before it ceased
To allow the employer to receive full tax relief on the contribution the employer can choose for the contribution to be treated in one of two ways. These are explained in RPSM05102120 and examples of how spreading of tax relief works when an employer ceases business can be found on RPSM05102130.
|Glossary ( RPSM20000000)|