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HMRC to assess claims on higher rate in-specie tax relief

HMRC to assess claims on higher rate in-specie tax relief

HM Revenue & Customs (HMRC) has said it will consider higher-rate relief claimed on in-specie contributions on a ‘case by case’ basis.

The taxman was responding to a letter from Amps, the trade association for Sipp providers, which asked for clarity about the status of higher-rate relief on in-specie contributions after HMRC asked 30 providers to pay back relief on previously claimed contribution. 

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 contributions the scheme administrator claims basic rate tax relief from HMRC. Any tax relief above the basic rate is claimed from HMRC by the member, the same as for cash contributions. This process is known as relief at source. 

As HMRC has challenged providers over such contributions there is uncertainty about whether it will do the same for higher-rate taxpayers.  

A freedom of information request by New Model Adviser® revealed 34 Sipp and small self-administered scheme (SSAS) firms had been blocked tax relief on these contributions in 2016. 

HMRC has also sent tax bills to around 30 Sipp operators asking for tax relief claimed by Sipp operators back from the 2012/13 tax year – a request which law firm Pinsent Masons is helping the Sipp providers challenge.

What has not been clear is what HMRC will do over higher rate tax relief claimed by members on in-specie contributions.

Sipp trade body the Association of Member-Directed Pension Schemes (Amps) has now written to HMRC asking for clarity on the matter.

‘I refer to HMRC’s campaign to retrospectively refuse annual relief at source on in-specie contributions,’ the letter seen by New Model Adviser® said. ‘While we can deal with this via the normal tax tribunal appeals procedure, this still leaves the separate issue of how this will affect any higher rate relief that the individuals concerned may have claimed personally.

‘Will HMRC be prepared to indicate, in general terms, what may happen in relation to any higher rate relief that may have been claimed personally in cases where HMRC is refusing annual relief at source?’

In response to this, a spokesman from HMRC said the issue of members’ tax relied will be looked at on ‘a case by case basis’.

‘In general terms HMRC would need to wait until any self-assessment return claiming higher rate relief in respect of pension contributions had been received – if any part of the claim related to refused RAS (relief at source) in respect of in-specie contributions, we would need to contact the member and discuss on a case-by-case basis. This could potentially mean requesting a revision to their self-assessment return.’

Richard Mattison, director at SSAS administrator Whitehall Group, said there is still much confusion around the in-specie issue and what HMRC is looking to do.

‘The gut feeling I have got from HMRC is that there are only very specific situations they are looking at and not general ones,’ he said. ‘But if 30 companies have had tax relief denied on in-specie contributions, then this points to a more widespread issue than I realised and indicates some kind of blanket ban?

‘In its latest newsletter HMRC clarified that in-specie contributions can be made, you just have to do them properly. It almost feels like they are honing in on certain people but I am still confused as to where they are going with this.’ 

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