Turn Your Company Profit Into Personal Wealth

Self-assessment deadlines have passed for the self-employed and PAYE workers to back date pension premiums and claim tax relief.  Usually that is considered the end of the important tax deadlines for this year.  This is not so!

Many companies will find their financial year end fast approaching and this represents a (hugely underutilised) opportunity for business owners to invest some of their company profits into an Executive Pension Plan.  Companies can usually offset the contribution in the current trading year as a legitimate business expense and therefore reduce the final Corporation Tax liability, and boost Director’s pension fund at the same time!  

What you need to know:

• This can be done in addition to regular contributions into a Director’s Pension. 
• Single contributions permitted are quite significant but even if the amount is more that can be offset for this trading year the company can spread the tax relief forward over a number of years.
• These additional company pension contributions are paid tax free into the pension fund and do not attract BIK.
• Company directors must be set up as PAYE employees but company pension contributions do not affect the tax relief on personal pension contributions.
• Any PAYE worker or company director with at least 20 years’ service is entitled to receive 150% of final salary* as a retirement lump sum.  This is an excellent chance to maximise your retirement lump sum as you approach retirement. 
• If your company’s financial year end is the 31st December then in order for the pension contribution to be allowed as a trading expense the contribution must be paid into the pension on or before the 31st of December. It is not sufficient to simply have the intention to make the payment.
• This can also be applied for key employees within the company and it is an excellent way of paying bonuses or salary increases in a tax free manner!

What to do now:

• Regardless of your age, it is important to determine how much can be paid for this year.  A Maximum Funding Report needs to be prepared to make sure you are within Revenue limits.  This confirms how much of a regular and/or once off or special contribution is allowed for this year.  Even if you have had one completed in the past you would still need an up to date report that would reflect changes in your pension fund values, salary, change in retirement age, marital status etc. 
• Keep the deadline in mind!  While we are closed for the Christmas festivities modern technology means that we have a great system in place to make sure those last minute contributions are submitted on time! Company pension contributions have been processed at the last hour whilst in the midst of preparing to host a New Year’s Eve party (although this is not the recommended approach for you to take!).
• Contact me on facebook, LinkedIn, email, phone or text for more information or please feel free to call into our office at the bottom of Patrick Street in Tramore.

Thank you for reading and have a great day!

Ciara.

Office: 051-391 777, Mobile: 086-085 4344