Pensions  

Sipp providers face HMRC warning over high risk investment

“We assume any Sipp did their due diligence before accepting Elysian shares. Certainly we provided underlying valuation information to many of them.”

Law firm Rebus has written to a large number of investors suggesting that they are faced “with some challenging options” due to the write down.

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James Hay Partnership told FTAdviser that clients have a total of £55m invested in Elysian Fuels through James Hay Sipps. A spokesperson for the firm said that non-standard investments make up only 1 per cent of its total assets under administration and Elysian makes up around a third of that 1 per cent.

James Hay said it completed due diligences in accordance with its procedures at the time and as a non-standard investment clients were required to confirm their sophisticated investor status prior to investing.

A spokesperson added: “We paid the adviser initial fees as per the fee agreement between the adviser and their client. We did not take any fees other than our published rate card for core product plus the fee for the module.

“This was an unlisted security requiring additional vetting, but it was treated the same as any standard transfer in/investment purchase. We did not facilitate loans nor did we have any special arrangement with either Elysian or the advisers.

“The decision on how to purchase the shares, whether these were financed or not and whether this finance was repaid or not, was an issue for the client in their personal capacity and their adviser, not the Sipp.”

Robert Graves, head of pensions technical services at Rowanmoor, said that the firm did have some investments in that but couldn’t say how much was invested. “We stopped accepting any Elysian share purchases back in 2012 when they were promoting Elysian 10/11.”

“Our exposure would appear to be quite small. There were too many concerns around it at that time and we said ‘no, we are not going to take it any further’.”

Martin Tilley, director of technical services at Denton’s Pension Management, whose Sipp has no exposure, said that charges can arise where the value of transactions take place between a connected person, such as a member and the pension scheme.

HMRC require that where such a transaction takes place, it must be at an arm’s length commercial value and in most cases evidenced by a professional valuation in writing.

“In the instance of a member selling an asset to the pension scheme at a price that could be deemed to have been incorrect, the tax charge can arise on the release of the pension fund monies to the member in exchange for that asset,” said Mr Tilley.

“In the instance at hand, our understanding is that shares may have been acquired by the member at a discounted price, then sold on the pension at a non discounted level.”