A clampdown by HMRC on tax relief given to certain pensions has raised questions about the fitness of the current guidelines.
A total of 34 firms that provide self-invested personal pensions (Sipps) and small self-adminstered schemes (Ssas) were blocked from claiming tax relied on in-specie contributions during 2016.
A spokesperson from HMRC said: “We can confirm that in 2016 HMRC refused to allow tax relief on in-specie contributions to a total of 34 SIPP and SSAS providers.
“There has been no change in our approach to contributions to pensions schemes, including the method by which an asset transfer can give rise to a relievable cash contribution.”
In-specie contributions to a pension are often property, shares or other assets from outside the pension scheme, used in place of cash.
The scheme administrator can then claim basic rate tax relief from HMRC on these contributions. Any tax relief above the basic rate is claimed from HMRC by the member, as it is on cash contributions.
Robert Graves, head of pensions technical services at Rowanmoor, said that the high number of firms rejected from claiming tax relief suggests that the guidelines around in-species transfers are in need of improvement.
“It would seem to suggest that whatever guidance was given by HMRC has not been at all clear. How could 34 companies have got it so wrong that they’re saying ‘No, we’re not going to provide you with the tax relief’?”
Mr Graves said that the issue could be that there have been some cases where inappropriate values have been used for hard to value assets and this has made HMRC reluctant to approve tax relief even on some readily valued assets being transferred across.
“That is a real shame because it’s not like the in-species process, if it’s done at legitimately fair values, it is not any form of tax evasion.
"It’s genuinely trying to simplify the process of someone being able to make a contribution by paying in some shares. All that the industry was trying to do is cut costs and hassle for the client but now most forms have stopped accepting in-species contributions.”