RPSM05102110 - Technical Pages: Contributions and tax relief: Employer contributions: Example of how tax relief is spread

Example showing how tax relief is spread

J Soap Ltd has paid contributions of

All the chargeable periods are of the same length.

Tax relief on the contributions paid in the chargeable period ending 31 March 2008 are potentially spreadable.

In the period ending 31 March 2008 £150,000 was used to pay for cost of living increases to pensions in payment. This gives a contribution of £1.8 million on which tax relief has to be spread over a 3 year period, split as follows

The remaining 1.8 million of the contribution paid in the period ending 31 March 2008 will be able to receive tax relief in that year.

The HMRC officer dealing with the tax affairs of J Soap Ltd accepts that the pension contributions were wholly and exclusively for the purposes of the company’s soap making business and so may get tax relief. The amount of contributions that may receive tax relief is therefore