RPSM05102160 - Technical Pages: Contributions and tax relief: Employer contributions: Multi-employer schemes

Multi-employer schemes

The following paragraphs give a broad outline only. Detailed guidance is provided in the Business Income Manual starting at BIM46000, specifically BIM46055 and BIM46060.

As explained in RPSM05102010 employer contributions to a registered pension scheme must be incurred wholly and exclusively for the purposes of the employer’s trade or profession if they are to attract tax relief.

Group Schemes

Where a company is a member of a group registered pension scheme relief is given for the amount it has paid to the scheme if the payment is wholly and exclusively for the purposes of the contributing company's trade.

In a group scheme the levels of contributions are likely to be set for the scheme as a whole. They may not reflect the individual circumstances of a particular employer. This does not prevent a deduction being allowed.

If the amount paid to a group scheme is apportioned between the employing companies on a reasonable basis, informed by actuarial advice where appropriate, you can accept that the amount attributed to each employing company is incurred wholly and exclusively for the purposes of that company's trade.

Where contributions to a group registered pension scheme are made, for example, by the parent company in the group with each employing subsidiary in the group being recharged an appropriate amount relating to its employees, the intra-group recharge may be accepted as being a contribution paid by the employer to the registered pension scheme. Such recharges should be accepted as contributions paid by the employer in the period of account in which the parent company paid the contribution to the registered pension scheme.

Non Group Schemes

As the payment of a pension contribution to a registered pension scheme is part of the normal costs of employing staff, it will usually be allowable expenditure. This applies also to where the contribution is to a multi-employer scheme for companies that are not in the same group, for example an industry-wide scheme, even though employees elsewhere in the industry may benefit from the payment.

Reviewing the allowability of a contribution as a deduction

An inspector who is considering a review or challenge to the allowability of an employer deduction should follow the guidance at BIM46001.