CTM09080 - Corporation Tax: charges on income: pensions to former employees

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 some other grounds,

you can treat them as a charge on income.

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