PSI5.3.8 - Contributions by Employers: Special Contributions - Cessation of Trading - Companies

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

When a company ceases to trade the treatment of any unrelieved balance of special contributions depends on whether the cessation happened because of a company reconstruction or for other reasons. Deal with cases as follows:

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

1. Company reconstruction. When a company's trade is taken over by a new company, and at least 75% of the shareholding interests in both companies are the same, the balance of a special contribution paid by the old company cannot be allowed as such against the new company's trading profits. The balance should normally be allowed against the profits of the old company's final accounting period. If it cannot be fully absorbed it then becomes a trading loss which is allowable against the future profits of the new company. This preserves the principle in PSI5.3.7and avoids an unnecessary spread back.
2. Other cessations. In all other cases any current spread will need revision. You may normally give an option of:-

1. allowance of the unexhausted balance against the profits of the final accounting period, or
2. reallocation of the special contribution on a time apportionment basis over the whole of the accounting periods between payment and cessation.