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Tax deductibility of pension contributions by an employer

​​With regard to Superannuation funds and pension schemes approved under Article 131 of the Income Tax Law; the limitation on the deductibility of employer's contribution is determined by Article 131(1) and at paragraphs 1(2) and 4 of the Income Tax (Jersey Occupational Pension Schemes) (Jersey) Order 2014.

With regards to personal retirement annuity contracts (Article 131B) and retirement annuity trusts (Article 131CA); there is no restriction contained in the relevant articles of the Income Tax Law on the amount of or the deductibility of an employer's contributions into an employee's scheme.  Hence the deductibility of an employer's contribution is determined by the 'wholly and exclusively' principle (see Article 70(a)).

Income Tax (Jersey) Law 1961 and amendments

No connection between employer and employee

In cases where the employer and the employee are not connected (by reference to the definition of 'connected person' contained in Article 3A), the Comptroller would normally accept that the contributions paid in the employee's scheme has been agreed on a strict commercial basis and in the best interests of the employer's trade. 

Such contributions are likely to be viewed as part of the ongoing staff costs of the business and should ordinarily be considered to be incurred wholly and exclusively for the purpose of the trade and therefore allowable for tax purposes.

Connected employer and employee

Where the employer and the employee are connected (again by reference to the definition of connected person contained in Article 3A), then consideration will need to be given as to whether or not the contribution is made in the best interests of the employer's trade or for some other reason (eg advantages to be gained by the connected employee).  If the Comptroller is of the view the payment has been made for some reason other than in the best interests of the trade, the Comptroller will treat the contribution as not having been made wholly and exclusively for the purposes of the trade and either all or part of the contribution will be disallowed for tax purposes.

​In helping to determine these cases the Comptroller will give consideration as to whether the contribution into the connected employee's scheme could reasonably have been expected to have been made if that person had not been connected.

Contributions made to one or more approved Jersey schemes

Where contributions are made to one or more approved Jersey schemes by a company owned by the person in those schemes, the amount of the contributions made by the company in the year of assessment that shall be left out of account shall not exceed 25% of the person's relevant received from the company in that year.

A person owns a company if s / he owns or is deemed to own more than 20% of the ordinary share capital of the company or s / he is a person connected with a person who owns or is deemed to own more than 20% of the ordinary share capital of the company.  (Whether or not that person is deemed to own shares will be determined in accordance with Article 82a)

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