BIM46010 - Specific deductions: registered pension schemes: timing of deductions

General rule

Employers’ contributions are deducted for the period of account in which they are paid by the employer (FA04/S196 (2)(b)), and for no other period (FA04/S200), unless either the deduction is required to be spread over a number of periods, as described below (FA04/S197) or the deduction is allowed for an earlier period (FA04/S199).

In practice, as the accounting treatment is not followed for tax purposes, this means that an employer's tax computation is adjusted to:

• add back the deduction for the pension scheme contributions shown in the employer's profit & loss account, and
• give a deduction for contributions to registered pension schemes on a ‘paid’ basis.

Spreading

Spreading of deductions may be required under FA04/S197 where there is an increase over 210% in the level of employer contribution from one period to the next. If the employer operates more than one pension scheme, you look at the respective contributions to each one separately and not the combined total employer contributions to all schemes. This is a specialist area and you should refer to the detailed guidance at RPSM05102070 onwards.

Section 75 Pensions Act 1995 - debts paid after cessation of trading:

Where an employer, who has ceased trading, has to make a payment into a registered pension scheme to satisfy a liability crystallising under PA95/S75, or Article 75 of the Pensions (Northern Ireland) Order 1995 (SI1995/3213 (NI22)) that payment is deductible in arriving at the profits for the final period of trading. Such a payment is treated as being made on the last day of trading (FA04/S199 (4)). See BIM46045.

Only payments falling within Section 199 are relieved in this manner. Where S199 applies, the relieving provisions at ICTA88/S105 (1) and (3) against post-cessation receipts do not require to be considered. See BIM80535.