RPSM05102040 - Technical Pages: Contributions and tax relief: Employer contributions: Payment of a winding up deficiency

Payment of a deficiency on a scheme wind up

A scheme that is not a money purchase scheme may not have enough assets to cover its liabilities when it winds up. In these circumstances

• section 75 Pensions Act 1995, or
• article 75 Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213 (N.I. 22))

may impose a liability on an employer to make good the deficiency.

Where an employer makes a payment to the trustees or manager of a registered pension scheme this will be deemed to be a contribution and so considered for tax relief.

Where an employer’s business has discontinued before it made the payment to the scheme tax relief can still be given by

• treating the payment as made on the last day that the employer carried out their trade, profession, vocation or business, and
• to the same extent as tax relief would have been given if the employer’s business had not discontinued.

Deficiency payments made in-specie

Deficiency payments that are made in specie will only be accepted as falling within section 199 FA 2004 if they comply with the same requirements that apply to employer contributions as set out in RPSM05102035.