Inflexible Revenue tax relief ‘will mean further closures'
UK - Inland Revenue restrictions on employer contributions to plug fund deficits could push more companies to abandon their final salary schemes, Horwarth Clark Whitehill warns.
The accountancy firm said the Revenue rigidly spreads the tax relief for “special contributions” over four years, leaving sponsoring employers waiting on backdated tax relief claims.
Horwarth Clark Whitehill pensions group head Zahir Fazal said this is a further addition to the raft of anti-DB measures still in place.
He said: “This creates a substantial mismatch between the cash outlay and the timing of the tax relief, which is disadvantageous for the payer.”
For example, he said, a company making a special contribution of £10m would only get a tax benefit of £750,000 in the year in which the contribution is paid, with the remaining £2.25m of tax benefit spread over a further three years.
Fazal added: “In these difficult times, one would expect the Inland Revenue to exercise its powers more pragmatically and for policy-makers to be seeking to encourage, rather than discourage, the elimination of these massive and worrying deficits.”
Mercer Human Resource Consulting senior consultant Deborah Cooper agreed and urged the Revenue to use its discretion to reduce such tax obligations.
“It is in the Inland Revenue’s interest for people to put money into pension schemes at the moment so this would be rather like shooting yourself in the foot.”
Latest stories
'Big four' must split audit and consultancy work, says CMA
PwC, KPMG, EY and Deloitte must break up their consultancy and audit businesses into distinct firms to provide greater focus on the "most challenging and objective audits", the competition watchdog has said.
DWP publishes GMP conversion guidance
The Department for Work and Pensions (DWP) has released its first batch of guidance setting out how the guaranteed minimum pension (GMP) conversion legislation may be used to resolve unequal payments.
Five stories you may have missed this week
This week's top stories include the government spending £800,000 on a Gogglebox advert and MPs writing to The Pensions Regulator about its engagement with the Railways Pension Scheme.
