(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 considering a proposed low NRD it is also necessary to
distinguish between ordinary arm's length employees and
directors/controlling directors. For example, a scheme for a
cricketer employed by a County Cricket Club may ask for an NRD of
40 and this will probably be acceptable. But some successful sports
people find it tax advantageous to form limited companies through
which their earnings are channelled in the form of director's fees.
In such cases a low NRD should not normally be agreed unless the
objects of the company set down in its Memorandum and Articles of
Association are restricted so that it can receive only the
director's sporting income. Without such a restriction it is not
the earnings as a sportsperson that are being pensioned but the
earnings as a director. This general principle applies to all
directors/controlling directors.
All requests for a low NRA in these circumstances must be
accompanied by the relevant documentation, i.e. the Memorandum and
Articles of Association.
