RPSM05102025 - Technical Pages:
Contributions and Tax relief: Employer contributions: Spreading of
indirect contributions
Spreading of relief on indirect contributions
In order to prevent avoidance of the spreading rules certain
payments by an employer are treated for spreading purposes as if
they are contributions to a
registered pensionscheme. Affected payments are those made on or
after 10 October 2007 except any made under a contract entered into
before 9 October 2007. The amount of relief in respect of an
affected payment comes within the normal spreading provisions as if
it were an employer’s pension contribution of that amount -
see guidance starting on page
RPSM05102060.
Affected Payments
The affected payments are those where the following conditions
apply:
- Without this rule the employer would be entitled to relief in a
chargeable period (2nd CP) in respect of a payment intended to
facilitate payment of pension contributions by a third party
whether under the original scheme or a substitute scheme.
- The employer made a contribution under the original scheme in
preceding chargeable period (1st CP).
- If the payment under 1 had been made instead as a pension
contribution by the employer to the original scheme relief would
have been spread under s197 and the purpose or one of the purposes
of arranging the payment via the third party was to avoid s197
applying (“the avoidance condition”).
A payment under 1 includes not only direct payments by the
employer but also where relief is ultimately given to the employer,
for example via an intra group recharge.
Where only part of a payment is intended to facilitate the
payment of pension contributions by a third party, only the amount
of relief in respect of that part is treated as a contribution of
that amount when applying the normal spreading provisions.
Original and Substitute scheme
The original scheme is the one to which the employer made
pension contributions in the 1st CP at 2 above.
The substitute scheme is:
- any registered pension scheme, to which there is a relevant
transfer in the 2 years before the 2nd CP payment at 1 is made or,
- any registered pension scheme to which it is envisaged that
such a transfer will be made after that day, or
- any registered pension scheme to which a transfer is made from
a substitute scheme, which if it had instead been a transfer made
at that time from the original scheme would have been a relevant
transfer.
Relevant Transfer
A relevant transfer is a
recognised transfer from the original scheme of
more than 30% of the aggregate of,
- for transfers within a. above the amount of the
sums and market value of the assets held for the purposes of, or
representing accrued rights under the original scheme immediately
before the transfer, and,
- for transfers within b. above the amount of those
sums and the market value of those assets on the day on which the
2nd CP payment at 1 is made.
For guidance on recognised transfers see
RPSM14101010.
