Money Talk: How can self-employed pensions best be managed? Experts answer your questions

Rebecca O'Connor, the Head of Pensions and Savings at interactive investor, also responded to Níall's issue: "Some of the confusion here could be down to the difference between a company registered at Companies House, which is the definition of a company in the eyes of HMRC and The Pensions Regulator, and a business which is not registered at Companies House, but is a trading name for a sole trader. A trading name can set up a pension scheme, but the sole trader can’t himself be an employee.

"Sole traders with trading names usually make pension contributions into a personal pension rather than the pension they have set up for employees.

According to The Pensions Advisory Service, 'entitled workers' have to have a contract of employment, and so be an employee and not self-employed.

"So although Niall has put himself on payroll, this would not meet this definition of entitled according to the above, as he does not have an employment contract.

"It’s concerning if he has been given incorrect information by HMRC and it may be worth him contacting them again to inform them of what has happened. He may be able to make a complaint if the advice was wrong based on the information he gave. He might also consider contacting the Pensions Advisory Service on 0800 0113797 to clarify his circumstances, employment and business status and giving details of the amount paid into the pension and to confirm whether it is possible to put the returning funds straight into a personal pension.

"In theory, if the money is returned to his bank account, Niall should be able to place it in a personal pension and could still get tax relief this way. However in practice, this could have further tax implications as it is not a transfer from one pension scheme straight into another and the amounts then contributed to the new pension may breach the annual allowance limit of £40,000 or up to current earnings, whichever is lower (although if the money is being returned, resulting in a tax charge, it is possible he could use carry forward of his previous three years’ annual allowances.)

"To find out what is the best course of action, he should put a call in to the Pensions Advisory Service."