Personal Pension  

HMRC stands strong on tax position for transfer victims

HMRC stands strong on tax position for transfer victims

HM Revenue and Customs has told savers set to lose some or all of their pension fund in the controversial Capita Oak pension scheme, a suspected pension liberation vehicle, that it will not relent on its position and will continue to apply penalty taxes.

FTAdviser understands that a letter reiterating this position has been sent to victims of the Capita Oak pension schemes this morning (7 April), the day after the new pension freedoms came into operation.

The original letter stated: “In similar cases HMRC has taken the view that such payments are unauthorised payments from a registered pension scheme that give rise to tax charges under sections 208 and 209 Finance Act 2004.

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“It is also possible (although not a given) that if we conclude that this scheme was set-up purely as a vehicle for pensions liberation then the entire member transfer-in (to Capita Oak) could be an unauthorised payment.”

Unauthorised payments give rise to 55 per cent taxes, plus penalties that can take the bill as high as 70 per cent. The letter states that at this stage no conclusions or decisions had been reached on the scheme as yet.

This follows on from financial secretary to the Treasury David Gauke ruling out a tax amnesty for members of Ark pension schemes verbally last month. The controversial pension liberation scheme allegedly left people with large tax bills and debts.

In May 2011, The Pensions Regulator was already looking at six schemes operated by Ark Business Consulting, as it operated a structure that used loans between pension schemes as a means of ‘unlocking’ pension capital prior to retirement.

In 2012, the regulator listed the Ark schemes in a statement warning consumers about pensions liberation.

Blackburn MP Jack Straw spoke in parliament on behalf of a constituent who was having to pay £32,000 in tax on money released from his pension, stating: “I hope that in this short debate the minister can clarify what the future holds for Mr Smith and other members of the Ark schemes.

However, Conservative MP Mr Gauke ruled out any amnesty, though he admitted it was probably unfair. At that time, he said: “In the situation as he describes it, it is hard not to be sympathetic to an individual placed in that position.

“However, the law is very clear that a loan payment of this sort constitutes a ‘payment’, and certain consequences follow.

“Although this might be unfair – I am sure that it is – on the right honourable gentleman’s constituent, others who are acting in not quite such a degree of good faith might attempt to liberate, as it were, their pension in the hope that it does not get picked up, and in the knowledge that if it does, they are in no worse a situation.”

A previous ombudsman decision stated that one individual who transferred his £376,000 pension scheme to Capita Oak may have to take the scheme to court to retrieve any of his original transfer value.