Possibly the most common query we get from Accountants relates to Company Pensions, specifically:
- How much can a company pay into a pension for a business owner?
- What are the rules for Corporation Tax (CT) Relief?
Transferring cash from a company into an Executive Pension Plan for a Business Owner makes a lot of sense. It allows for a tax efficient transfer of company wealth to private ownership, protects that cash from creditors, and reduces the company corporation tax liability.
There is a complex formula defined by Revenue which specify’s the level of pension payment a Company can make into a Company Pension.
The factors involved in this calculation are:
✅ Marital Status
✅ Gross Income from the relevant employment
✅ Value of the current pension (if any)
✅ Value of other pensions from previous employment (if any)
✅ Years Service with the relevant employer
On top of this, when the calculation is done, it gives different funding options such as:
- Future Ordinary Annual Contributions (FOAC) – Relief always available in year paid
- Matching Ordinary (FOAC) & Special Contributions (SC) – Great method of extracting the maximum amount in the current year & getting CT Relief immediately
- Special Contributions for Past Service (SCPS) – CT Relief available in the year in which the payment is made, if it’s less than €6,350, or no greater than the corresponding FOAC. Otherwise CT Relief must be carried forward over a number of years.
We are more than happy to provide a calculation for you or your clients.
We have a recorded Webinar which gives more information on this topic in our ‘Past Webinars from Michael & Jim’ section.
Please feel free to contact us using the contact form or reach out to us:
Dublin: 01 5267770 Wexford: 053 9110380
Serving Dublin, East Coast, Midlands & South East
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