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Contributions: Tax relief on employer contributions
Since 6 April 2006 (A-Day), employer contributions to an occupational pension scheme have been deductible as an expense provided that they are incurred “wholly and exclusively” for the purposes of the employer's trade or profession. This initially resulted in uncertainty for employers, because of the way the provision was interpreted by individual inspectors.
In February 2007, HMRC published revised guidance in the Business Income Manual. The guidance confirms that, as part of the cost of employing staff, pension contributions will, prima facie, be allowable (including the situation where one party makes a contribution on behalf of another). The “wholly and exclusively” rules will only be considered in limited circumstances.