Employer Pension Contributions - 'wholly and exclusively' Test

In order for a limited company to claim Corporation Tax relief on any pension contributions it wishes to make into an employee's pension, HM Revenue & Customs will need to establish that any such contributions are made 'wholly and exclusively for the purposes of the trade, profession or vocation'.

This means your Local Inspector of Taxes will decide whether the total remuneration package, including salary, bonuses, commission, benefits in kind and any employer pension contributions are commercially reasonable for the work done by the individual employee concerned.


If you are a controlling director, and are the driving force behind your company and you generate most or all of the business's income, the level of your remuneration package is a commercial decision and is therefore unlikely to fail the 'wholly and exclusively' test.

Your limited company would therefore be able to make a large contribution into your pension and claim the whole of the contribution against Corporation Tax.

The employer contribution is deducted from the firm's trading profits for Corporation Tax purposes and can therefore normally only be applied to the period of company accounts in which it is paid.

In order to claim Corporation Tax on the whole of the employer pension contribution, it must be kept within the company trading profits  for the accounting period.

A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Serving Wrexham, Chester and North Wales

The guidance provided within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK. North Wales Independent Advice is an appointed representative of TenetConnect Services Limited, which is authorised and regulated by the Financial Conduct Authority. TenetConnect Services Limited is entered on the Financial Services Register (www.fca.org.uk/register) under reference 150643. Principal: David Jones

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