The company entered into a contract with Mr J Singh within 9 months of the year end to satisfy
a constructive obligation that existed at the year-end of 30th November 2022 to provide a
pension upon Mr J Singh’s retirement at a future date. No payments have been made and no
funds are either earmarked or held in trust or otherwise designated by the company for the
purpose of providing the pension. The pension may be paid either by the company by reference
to an annuity that may be purchased on the open market at or around the date of retirement for
a specified sum of money (calculated in accordance with the terms of the contract) or
purchased from a third party annuity provider of a sum equal to that specified sum of money
or a combination thereof.
The pension arrangement is in the form of an unfunded retirement benefit scheme. The
company has recognised the cost of the employee benefits and recorded in the profit and loss
of the company under Section 28 of FRS102 "Employee Benefits". The contractual obligation
between the company and Mr J Singh is a present obligation that has arisen from a past event
and such obligation can be reliably measured. As such a corresponding deduction has been
claimed in the company's corporation tax computation for this obligation.
The contract, which is not a registered pension scheme, provides only for the payment of a
pension or at the option of the company a purchased annuity. No other benefits are provided.
The amounts provided for in respect of the year ended 30th November 2022 in respect of the
provision of a pension for Mr J Singh was £150,000 which is broken down as to a provision
of £124,518 for the current year plus indexation of £25,482 as calculated for a previous year’s
award and as provided for in that years pension agreement. The total balance as at 30th
November 2022 of the pension awards and indexation thereon stands at £255,000.
The provision has been made wholly and exclusively for the purpose of the company's trading
activities and therefore the provisions of section 54 CTA 2009 do not apply. Section 1288 CTA
2009 does not apply as the provision is not and does not relate to remuneration as defined by
section 1289 CTA 2009. Section 1290 CTA 2009 prevents deductions in respect of "employee
benefit contributions", where property is "held or may be used" as defined by section 1291
CTA 2009 for the benefit of an employee, no funds are held specifically for the purpose of
fulfilling the company's obligations under the pension agreement with Mr J Singh therefore
section 1290 CTA 2009 does not apply
Section 246 FA 2004 and 246A FA 2004 deny relief for provisions made by an employer in
relation to non-registered pension schemes providing relevant benefits. However, they are not
applicable in this case as no relevant benefits as defined by section 393(B) ITEPA 2003 are to
be paid and furthermore the contract does not provide for the payment of relevant benefits.