Employer contributions to any type of pension arrangement in a registered pension scheme are always paid gross. Tax relief is given by deducting the gross amount of the contributions from an employer’s taxable profits before Corporation Tax is calculated.
Employers’ contributions can normally be treated as a deduction for the accounting period in which the contribution is paid by the employer. The only exceptions are where the deduction is required to be spread over a number of periods or the deduction is allowed for an earlier period.
HMRC may require the tax relief to be spread over more than one period of account where there is an increase over 210% in the level of employer contribution from one period to the next. If the ‘spreading rules’ apply, the relief due to an employer on the making of a contribution to a registered pension scheme is not given entirely in the chargeable period in which the payment is made. Instead, part of the relief due is spread forward into future periods. This is a specialist area and advice should be taken before any payment is made.