Forum

• # 76010
• Wed 02 Nov 2011 08:57 PM

hello, would anyone be able to offer me some advice,

i am working on sage, with a self employed sole trader.

i have private pension payments and class 2 national insurance payments, in the overhead section of the C O A.

i am about to run the year end proceedure and would like to know if i should leave them in the overheads section, or should i transfer them to drawings.

i am drawn to transfering them to the drawings account, is this correct?


all input greatfully received,
rachel 
    

            

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• # 76012
• Wed 02 Nov 2011 09:51 PM

Hi,

I also work on sage. I would transfer them to drawings or if not remember to deduct them when/if you do the adjusted trading profits. Probably more straight forward just to put through drawings.

Kaz

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• # 76025
• Thu 03 Nov 2011 08:23 AM

hi karen.

thank you very much, i needed some confurmation on what i was thinking,

thank you again,

rachel 

Edited at 03 Nov 2011 08:23 AM GMT

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• # 76029
• Thu 03 Nov 2011 09:00 AM

Hi Karen/Rachel.

The Class 2 national insurance is drawings however the pension may qualify as an allowable expenses against his profit as long as it meets certain parameters.

I think you will either need speak to their accountant, Do some digging or call the ICB helpline as I cannot remeber all the nuiances that come along with sole traders and pension provision.

Kind regards
Stuart

• Forum Moderator, South East & Greater London Regional Chairman
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• # 76032
• Thu 03 Nov 2011 09:32 AM

Thank you stuart, i will have a look into that.

rachel.

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• # 76036
• Thu 03 Nov 2011 09:49 AM

Rachel,
Self Investment Personal Pensions (SIPP) contributions are free of basic rate tax. The reliefs changed for 2011-12 and are restricted to the basic rate tax for individuals with annual income of £150k or higher. The pension provider should issue your sole trader with an annual statement of contributions.  The pension poivider should be able to advise you. Better still if done through a broker ask them.
Tim 

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• # 76038
• Thu 03 Nov 2011 10:02 AM

Tut Tut - a fellow leading others up the garden path I think.

There is no provision (as far as I am aware) for pension contributions to be included on a P&L account for sole trader. They should be drawings.

For the tax relief element -

In days gone by pension payments were paid gross and then declared on the SA return so as to reclaim the tax relief.
HMRC then changed the rules so that new policy payments were paid net of basic rate tax and the pension provider recovered the tax equivalent from HMRC.

That is certainly the way in which my pension payments (and I have both) are treated.

To include these on the P&L leave a big door open for incorrect application of tax deduction.

Of course pension payments will come into the P&L of a limited company - usually within staff and welfare etc - but there may be other implications if the payments are for a director (and that is something I am not up to speed on). I think (but cannot be sure without doing research) that they would not be allowable if the employee/director received a physical payment from the company to pay towards a pension that the individual had taken out.

All in my opinion of course. 

Geoff         

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• # 76049
• Thu 03 Nov 2011 11:32 AM

thank you everyone for your help and information,

it has given me quite a lot to think about,

rachel

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