BIM46070 - Registered pension schemes: wholly & exclusively: payments by third parties, not within FA04/S196

The legislation in FA04/S196 – FA04/S199 ( BIM46005) only applies to contributions made by employers and former employers; remembering that employer for this purpose includes ‘sponsoring employers’ of the scheme.

Payments by a contributor other than a sponsoring employer do not fall within FA04/S196. To be allowable as a deduction in computing the third party’s trading profits a 'third party' contribution must therefore satisfy the established general principles of being:

• revenue expenditure,
• made wholly and exclusively for the purposes of the third party's trade, and
• deductible for the period concerned in accordance with GAAP.

There are three main situations in which someone other than an employer or former employer (a ‘third party’) may make contributions to a registered pension scheme on or after, 6 April 2006.

In each case the wholly & exclusively principles apply equally to contributions by third parties, which do not come within FA04/S196 – FA04/S199. In particular, consideration will again need to be given to the weight of reputation and morale purpose, in light of the facts established. Contributions by third parties may require further consideration in the following circumstances:

• Contributions required following the issue of a Contribution Notice or Financial Support Direction by the Pensions Regulator ( BIM46050).
• Contributions made under a guarantee arrangement ( BIM46045).
• Contributions made voluntarily by the third party ( BIM37750 and BIM46065).