Sipp providers face HMRC warning over high risk investment

Sipp providers face HMRC warning over high risk investment

HM Revenue and Customs is understood to have written to self-invested personal pension providers and IFAs seeking information about investments in Elysian Fuels, amid fears some investors could be exposed to a 55 per cent tax charge.

Elysian Fuels was marketed by Future Capital Partners in a series of investments. Marketing material describes it as providing operational support to bio-fuels firm Vireol in relation to the recommissioning of an existing 62m gallon bioethanol plant in the US, as well as a renewable transport fuels refinery and technical centre in Grimbsy, North East England.

Future Capital Partners originally said in marketing material that it targeted post tax returns of ten times the initial investment over eight years, with the potential to borrow up to 84 per cent of investment on a limited recourse basis. It said investors should be “experienced”, with at least £50,000 to invest.

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It is clear that some investors have sold their investment in Elysian Fuels to their Sipps, with experts stating concerns about the valuation of the shares at the time of such a sale being likely to have prompted HMRC’s interest.

An HMRC spokesperson said: “We cannot comment on our compliance activity or individual pension schemes.”

Shares in Elysian Fuels had been written down to zero down from £1 last year. However, Future Capital Partners director Tim Levy told FTAdviser that he still expects the investments to make a profit overall.

“Whilst it is true that about £200m was raised in total by Elysian LLPs, 84 per cent of this sum was limited recourse debt, which is still expected to be repaid in full and is still expected to make a profit overall,” he explained.

“The shares were priced always at the level the directors felt would allow the required capital to be raised. There were no guarantees of returns and it was understood by all investors that, in order to enjoy any return, the underlying ethanol assets would have to generate returns of at least £100m.

“The sale for a disappointingly low sum, due to market conditions of the US plant, has led to the directors of the Elysian corporates providing in full for the value of their interest in each Elysian LLP. So, in simple terms, last year the directors were content that the prospects of returns from the ethanol assets justified the £1 per share value of the LLP interest – but they now believe that, based on the facts now available, it should be fully written down.”

Mr Levy added that this does not mean that the investment has been lost, with the UK project possibly still being built and be successful in excess of the required level of £100m.

He maintained the Elysian was not specifically meant to be a Sipp investment and certainly that not all investors sold it into Sipps. “The fact that some investors decided to sell their shares to their Sipp post investment does not make it a Sipp investment.