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Technical View

Technical View

Your Questions Answered


Welcome to this month’s Technical View where we will be focusing on some recent questions received by the Technical e-helpdesk. Questions about employer pension contributions and client’s access to UK registered pensions when they have moved away from the UK. We hope that this will help you with some queries you may receive.

Technical View aims to answer queries received by you, as a financial adviser for your use when you meet clients in similar scenarios. We hope that this provides useful, topical and valuable information.

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Question 1 


A client who has recently moved to Abu Dhabi for work would like to establish a pension contribution as there is no pension provision out in Abu Dhabi. There is no fixed term on this contract and remains on the books of a temping nursing agency in the UK to access work on their return. 

Would the client be able to make a pension contribution to a registered UK pension whilst she is a non-UK taxpayer? 

Answer 1


In order for the client to make contributions into a registered UK pension scheme, she would need to be a relevant UK individual, click here for more information.

Here it states that an individual is a relevant UK individual for a tax year if they: 

  • Have relevant UK earnings chargeable to income tax for that year,

  • Are resident in the UK at some time during that tax year,

  • Were resident in the UK at some point during the five tax years immediately before the tax year in question and they were also resident in the UK when they joined the pension scheme, or

  • Have for that tax year general earnings from overseas Crown employment subject to UK tax (as defined by section 28 of the Income Tax (Earnings and Pensions) Act 2003), or

  • Are the spouse or civil partner of an individual who has for the tax year general earnings from overseas Crown employment subject to UK tax (as defined by section 28 of the Income Tax (Earnings and Pensions) Act 2003.


If the company she is working for is a UK registered company, her employer may be able to make contributions into a UK pension scheme on her behalf.  Employees who are not resident in the UK may be members of a UK registered pension scheme where an employer undertakes to provide employees with a pension as part of their employment package. The costs of providing that benefit have to be incurred for the purpose of the trade, whether or not the employees are resident in the UK, and in such circumstances, employer contributions would normally be eligible for corporation tax relief.

For the employer contribution to attract corporation tax relief it would have to satisfy the wholly & exclusively rule see here. Also HMRC may question the contribution if the total salary and benefit package is excessive for the work undertaken and contributions made for non-arms length employees are often reviewed by the local inspector of taxes. General guidance on employer’s contributions to a registered pension scheme is set out in the Business Income Manual here.

Question 2


A client has approximately £160,000 in the limited company account and the trading profits for 2015/2016 year are expected to be approximately £40,000. Can the company make a larger employer contribution than the profit generated which will make the company a loss for the year?

Answer 2


Whether the employer can make a contribution and for this to be treated as a business expense is really a matter for the company accountant as it will very much depend on the individual circumstances of the case. An employer is not restricted by relevant UK earnings when making contributions on behalf of an employee, unlike personal contributions, which are limited to what the employee earns. Potentially a company could contribute more than the employee's earnings (up to the current annual allowance of £40,000, or potentially up to £190,000 in some circumstances, if using carry forward and subject to there being sufficient unused annual allowance to do this).  In doing this the ‘wholly and exclusively’ rule (see here) would need to be met in order for the contributions to be treated as a business expense.

It is accepted that the contributions are paid wholly and exclusively for the purposes of the trade where the remuneration package paid in respect of a director of a close company, or an employee who is a close relative or friend of the director or proprietor (where the business is unincorporated) is comparable with that paid to unconnected employees performing duties of similar value. Also, another factor that often needs to be considered is if there is any existing contractual obligation to make employer contributions.

Question 3


A client who has recently started working in Qatar has a Friends Life personal pension which his UK registered company is currently contributing to. The client is 56 and is currently a non-UK taxpayer but will reside permanently in the UK at retirement in approximately 9 years time.  

A company approached the client trying to get them to move their pension to a QROPS pension scheme as they have said that if he passes away while working abroad the pension would pass to his wife but minus 55% tax charge.

My main queries are:

  • Can his current UK registered company pay into his pension with him working outside of the UK?

  • Will his current UK pension incur a 55% tax charge on his death regardless of how it is passed to his wife?

Answer 3


As far as we can see there are no QROPS in Qatar. It looks as though their regulator is not keen on dealing with them due to the possibility of being open to pension liberation scams. The QROPS provider may be promoting a QROPS in a different country but HMRC take keen interest in schemes located in a country where the individual is not resident.

In terms of the tax implications on death benefits from a UK pension, if it is a defined contribution (DC) scheme it could (depending on the rules of the scheme) benefit from the changes that are coming in April. Currently the 55% tax charge only applies to lump sum death benefits paid from crystallised funds where the member is under age 75 at the time of death. So unless your client is in drawdown, this would not apply. 

As of 6th April 2015 the tax to be paid on any DC pension death benefit will depend on the type of payment made and the age of the client at date of death:

  • If the member dies before the age of 75, they will be able to pass their pension pot to nominated beneficiaries tax free. The beneficiary can then access the pension savings either as a single lump sum payment or as a series of lump sum payments through flexi-access drawdown (FAD). Both of these options are free from inheritance tax (IHT) as long as the lump sum payment is made, or the FAD fund is set up, within 2 years.

  • If the member dies at or over age 75, they will still be able to nominate beneficiaries to whom they can pass on their remaining pension fund. If this is accessed through FAD, or paid as a single lump sum the beneficiary will pay tax at their marginal rate, as due to the age of the client, this would be post 2016/17 tax year when the tax charge changes.With regards to the employer contributions, provided the client is an employee of the company, contributions can be made on their behalf. Employees who are not resident in the UK may be members of a registered pension scheme. Where an employer undertakes to provide employees with a pension as part of their employment package, then the costs of providing that benefit are incurred for the purpose of the trade, whether or not the employees are resident in the UK, and in such circumstances, employer contributions would normally be eligible for corporation tax relief.


For the employer contribution to attract corporation tax relief it would have to satisfy the wholly and exclusively rule see here for more details. Also HMRC may question the contribution if the total salary and benefit package is excessive for the work undertaken and contributions made for non-arms length employees are often reviewed by the local inspector of taxes.

A point to consider: if the client went to Qatar earlier in this tax year, he may have sufficient relevant UK earnings for the 2014/15 tax year to justify personal pension contributions which could potentially attract a higher rate of tax relief than that available via corporation tax relief.

Hopefully this edition has provided some answers for you on similar queries you may have. If you have further queries on the content of this edition or other technical queries then please contact the Technical e-helpdesk at technical@sanlam.co.uk.

Date Issued: March 2015

This note is to be used by Financial Advisers only. It is not intended for onward transmission to a private customer and should not be relied upon by any other person. Sanlam accepts no liability for any action taken or not taken by an individual or firm as a result of the contents of this material. The tax treatments and information contained in this document is based on current tax law and HMRC practice as at March 2015 and may be subject to change in the future. Whilst we have made every effort to ensure the accuracy of this material, we cannot accept responsibility for any consequence (financial or otherwise) arising from relying on it. This document is for information purposes only and should not be treated as advice and independent taxation advice should be always sought.

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