Curtis Banks has set aside £403,000 to deal with tax relief issues on in-specie pension contributions, after the taxman claimed victory in a major industry case.
According to the self-invested personal pension provider’s full year results, published this morning (April 7), the firm believes there will “more likely than not” be some costs incurred due to issues with tax relief on in-specie contributions.
This comes after HM Revenue and Customs challenged all Sipp providers on whether pension contributions could be made in-specie.
In-specie contributions are where assets such as property or shares are transferred into a Sipp without first being converted into cash.
In May 2020, the Upper Tribunal ruled pension tax relief is not claimable on in-specie contributions and paved the way for the taxman to reclaim millions.
Many providers had relied in good faith on the guidance in the Pensions Tax Manual, which set out a procedure for allowing assets transferred in specie to be treated as a contribution for tax relief purposes.
At the end of last year (December 2020), HMRC updated its guidance relating to in-specie contributions to clarify when tax relief will arise.
Curtis Banks stated: “The group has been in correspondence with HMRC regarding processes and documentation in respect of in specie contributions for some time.
“Following a favourable outcome for HMRC in an appeal against the First-Tier Tribunal’s ruling in favour of another Sipp operator in a similar case, and having taken further legal advice, the group now considers it more likely than not that some cost associated with this liability will be borne by the group and has recognised a provision of £403,000 to reflect this.”
Curtis Banks added that this was an industry wide issue affecting other Sipp operators which had been challenged by the sector as a whole.
But it stated that the “directors now consider it more likely than not that some cost associated with this issue will be incurred by the group”.
Jane Ridgley, chief operating officer, told FTAdviser: “Given our size we are not immune from some of the challenges that are out there currently so it is purely a provision at this point in time should it not be possible for us to recoup these monies via other routes.”
Elsewhere, Curtis Banks saw profits before tax fall by 32 per cent to £7.4m for the 12 months ended December 31, 2020, compared to £10.9m the year before.
This included £3.5m of non-recurring costs incurred during the year on previously announced restructuring activities and acquisition related costs.
However, Curtis Banks stated it measures its performance by adjusted profit before tax as it said this is “considered to better reflect the underlying results of the business by adjusting for those items which do not arise from the underlying operations of the business”.
Adjusted profit before tax remained steady at £13.4m.
Meanwhile, assets under administration increased from £29.1bn in 2019 to £32.4bn in 2020.