The UK tax man has decided to carry on the fight after losing a legal challenge against a crackdown on in-specie pension transfers.
These transfers allow retirement savers to hold property, shares or other assets in their pensions, while claiming tax relief on their value in the same way as relief is claimed on a cash contribution.
An in-specie transfer means a saver does not have to sell assets to make a pension contribution in cash, which removes the risk of a price drop on the day of the transfer.
But HM Revenue & Customs argues that many retirement savers are allegedly overvaluing their assets to boost their tax relief, which is against the spirit of the law.
Two years ago, HMRC stopped allowing tax relief on in specie transfers and demanded millions of pounds of tax relief back from pension providers.
Pension transfer embargo
Last month, provider Sippchoice won a tax tribunal case against HMRC relating to tax relief on an in-specie transfer of unlisted shares valued at more than £68,000.
Lawyers have told the firm that HMRC intends to appeal, but the court has not yet given leave.
The grounds for the appeal are uncertain at this stage.
Meanwhile, a voluntary embargo on in-specie transfers by 26 pension providers remains in place.
“We are expecting the appeal and as a result it is only the first battle and it is certainly not a game changer until the Revenue throws in the towel,” said a Sippchoice spokesman. “So, now we, and I don’t think any other Sipp providers, are not accepting in-specie contributions.
Argument over meaning of words
“At this time, we have no idea what the basis of the appeal might be.”
HMRC has made no comment about the case.
At the tribunal, HMRC claimed the term ‘contribution paid’ in pension legislation meant a cash payment.
Judge Heather Gething decided differently, stating the term was wide enough to cover the transfer of assets in settlement of a debt, which is what happened in the case before the court.
If the in-specie transfer was not considered as paid, the contribution would not have qualified for tax relief.
Click to read the tax tribunal decision