HM Revenue & Customs (HMRC) has refused to give tax relief on in-specie contributions to 26 Sipp and SSAS firms, a freedom of information (FOI) request by New Model Adviser® has revealed.
People in the industry said the number of firms affected indicated the problem facing Sipp and SSAS providers was 'much wider' than initially thought.
In-specie contribution is the use of property, shares or other assets from outside the pension scheme to contribute to a pension, instead of cash.
Following these in-specie contributions the scheme administrator claims basic rate tax relief from HMRC and any tax relief above the basic rate is claimed from HMRC by the member, the same as for cash contributions.
In August New Model Adviser® revealed that ‘most’ Sipp and SSAS firms had stopped accepting in-specie contributions after HMRC challenged these contributions from a number of providers.
A roundtable held in August and chaired by solicitors Pinsent Masons and featuring the Association of Member Directed Pension Schemes’ (Amps) discussed how the industry should respond to HMRC.
For the six months up to 5 September, HMRC refused to give tax relief on these contributions to 26 Sipp and SSAS firms, the FOI showed.
However HMRC said it could not say why, because giving the reasons ‘could identify specific persons’ involved.
A source familiar with the situation told New Model Adviser® that part of the reason why HMRC has refused to accept these contributions is because of concerns about firms not following the guidelines which it has set out.
‘It seems like some companies have not been following the procedure and some of it is based on transfer of assets where there is unsupportable valuation with unquoted shares and intellectual property, which is very hard to value,’ they said.
‘It seems like some people have been up to some cavalier activity.'
In its response to the FOI request, HMRC said it ‘has clear guidance in place to explain how the method by which an asset transfer can give rise to a relievable cash contribution’.
Richard Mattison, director at SSAS provider Whitehall Group, said the fact 26 firms have been refused tax relief shows it is a bigger issue than he first anticipated.
‘It shows to me that this a wider issue which calls for greater concern than we originally first thought,’ he said.
‘It may still be that this directed specifically at certain types of in-specie contributions, for example certain assets, or whether the revenue’s process may not have been followed properly. We all have to digest this and decide what to do going forward.’
Amps has met with HMRC in a bid to resolve the situation in the last week.