Contributions for director with no salary

T

ThirstyLizard

Registered User
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Hi all,

I am wondering if it is possible for a Ltd Co to contribute to a PRSA on behalf of a Director if the director is receiving no salary from the company.

If possible, are there specific restrictions and how are the limits calculated?

Thanking you!
 
No, it’s not.

There is no limit per se, but the person needs to be employed legitimately and earning.
 
Gordon Gekko said:
No, it’s not.

There is no limit per se, but the person needs to be employed legitimately and earning.
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Thanks Gordon.

Is there a minimum salary that must be paid in order to start funding a pension?

For example, if the director were to receive a nominal salary of say €5k/yr could the company then contribute to the directors PRSA?

The Director has been working part-time (~15-20hrs/wk) in the business, however hasn't received a salary as yet as the business has been loss making until now.
 
Life companies have told me that they will reject PRSA applications if they don't believe the employment is bona fides. If a load of cases are submitted where a child on work experience is getting €100,000 pension contribution or someone is employed for a day, the Revenue will pull the plug on the no annual limits. Remember, you have to submit your PRSI number and the company tax registration number on the proposal form. It's not hard for the Revenue to check these things.


Steven
www.bluewaterfp.ie
 
Steven Barrett said:
Life companies have told me that they will reject PRSA applications if they don't believe the employment is bona fides. If a load of cases are submitted where a child on work experience is getting €100,000 pension contribution or someone is employed for a day, the Revenue will pull the plug on the no annual limits. Remember, you have to submit your PRSI number and the company tax registration number on the proposal form. It's not hard for the Revenue to check these things.


Steven
www.bluewaterfp.ie
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Why are they doing this? Surely it’s none of their business and it’s not appropriate for them to give tax advice? Did they not learn from the last time they tried to give views on whether a pension transaction was bone fide?
 
Oisin19 said:
Why are they doing this? Surely it’s none of their business and it’s not appropriate for them to give tax advice? Did they not learn from the last time they tried to give views on whether a pension transaction was bone fide?
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If you have a mad up job, you can't fund a pension for it. You can literally put €2m from the company into a pension in one day and then mature it immediately (subject to age limits) and claim tax relief on it. It has to be real. As with everything else.
 
Very helpful replies, thanks to all!

I have a follow-on question that just occurred to me to ask...

The company has two directors. One of the directors has a minority shareholding of just 1%, another with 99%.

With all else being equal (salary, length of service etc), are both directors treated equally in terms of the allowable pension contributions? Or is there a minimum level of company ownership required?
 
Oisin19 said:
Why are they doing this? Surely it’s none of their business and it’s not appropriate for them to give tax advice? Did they not learn from the last time they tried to give views on whether a pension transaction was bone fide?
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What do you mean it’s none of their business?

If they knowingly facilitate tax evasion, that’s a world of trouble landing on their doorstep.

Of course it’s their business.

The same people moaning about them checking the compliance of something would be moaning if they didn’t.
 
There is a big difference between evasion and planning. Surely they have aml/compliance departments for that. It’s not thier role to give companies/clients tax advice on what is commensurate etc.
 
Oisin19 said:
There is a big difference between evasion and planning. Surely they have aml/compliance departments for that. It’s not thier role to give companies/clients tax advice on what is commensurate etc.
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I don't think it's giving tax advice. If a PRSA provider is asked to take contributions on a case that they believe contravenes the rules, then they would be correct to exercise their discretion to refuse the business. Otherwise they could be seen as facilitating tax evasion. If a client or broker wants to get clarification from Revenue that their interpretation is correct and the PRSA company is wrong, let them get it and give it to the PRSA company, who I'm sure would then be happy to take the business.
 
Hi Liam,

Can you help me to understand what rules are being contravened?

1. Are directors' fees pensionable?
2. If yes - can the employer make PRSA contributions on such earnings?
3. Is there a cap on the allowable contributions versus the directors' fees?
 
Oisin19 said:
There is a big difference between evasion and planning. Surely they have aml/compliance departments for that. It’s not thier role to give companies/clients tax advice on what is commensurate etc.
Click to expand...
If someone contrives to contribute to a PRSA when it’s a fake employment, that’s tax evasion. It’s not planning.
 
Robzig said:
Hi Liam,

Can you help me to understand what rules are being contravened?

1. Are directors' fees pensionable?
2. If yes - can the employer make PRSA contributions on such earnings?
3. Is there a cap on the allowable contributions versus the directors' fees?
Click to expand...

There must be an employer / employee relationship. This would usually be interpreted to mean that some form of salary is being taken. If so, then there's no limit on employer contributions to a PRSA.
 

Are directors' fees and/or dividends pensionable?

...for the purposes of making contributions to an Occupational Pension Scheme?
www.askaboutmoney.com

I agree with Conan here.

My question remains......can anyone tell me what rules are being contravened when a director is paid a director's fee and the company contributes to a PRSA on his behalf please?
 
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