Pensions and tax liabilities can be enormously confusing if they are not administered correctly and expertly by HR payroll professionals. When it comes to the commingling of the two, some businesses have previously found that asset backed pension schemes have been extremely financially favourable in term of payments to the Taxman. Yet changes are afoot to address the way in which some companies have been legally entitled to double helpings of tax relief when putting their assets behind their staff pension contributions.
Asset backed pension contributions have become increasingly popular amongst larger businesses over recent years. Under traditional circumstances, the pension contributions of staff are supplemented by company contributions on a cash basis. Cash contributions are then often invested in bonds and shares. However, in the case of company contributions that are asset backed, businesses replace cash contributions with the rights to brands, rental incomes and other existing assets.
The making of staff pension contributions by way of assets rather than cash has, however, resulted in twice the amount of tax relief for some companies that have decided to go down this route. A business transferring the right to property rental to its pension scheme has been able to claim back tax on the transfer amount, besides the actual rental amount itself.
Businesses that already make asset backed pension contributions should not panic that they have been doing something horribly and illegally wrong. They have not, although they should be prepared for changes following a Treasury review in December 2011. Businesses considering making changes to the way they contribute to staff pensions may choose to think again.
At Moorepay, we are a cutting edge payroll company that takes great pride in staying ahead of the game on behalf of our clients. Whether current pensions and tax legislation is causing headaches, or evolving legislation looks set to cause them, we offer expert payroll solutions to suit.