Landmark HMRC Case Sees Contributions into Pensions of Non-Cash Assets Not Attracting Tax Relief

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The Upper Tribunal ruled in favour of the HM Revenue & Customs that members of a Self-Invested Personal Pension would not be able to claim tax relief on non-cash contributions towards their pensions.

The ruling comes after the Upper Tribunal confirmed that the phrase “contributions paid” in s.188, Part 4 Chapter 4 of FA 2004 only applies to monetary contributions, specifically cash. Therefore, the same term does not include pensions paid in the form of in-specie contributions such as shares and properties.

HMRC is now poised to reclaim millions following this ruling. This is a landmark development, as it sets the tone for future judgments and decisions in the pensions industry. A lot of administrators have relied on the Pensions Tax Manual and how it should guide decisions relating to in-specie contributions. Still, it has proven to provide a confusing stance on the matter. The Manual has a detailed procedure on how non-cash assets are to be treated as contributions, in relation to tax relief. However, the Upper Tribunal only accepts cash contributions qualified for tax relief.

Historically, the Upper Tribunal is seen to rule in favour of the HMRC and SIPP. In 2018, HMRC refused to accept a tax relief claim from a Sippchoice client for in-specie contributions worth more than £60,000. It stood by the statement that “contributions paid” only refer to money, and is not inclusive of transfer of assets.

According to Sippchoice, the tax guidance in use by the HMRC is not consistent with the law and is prone to misinterpretation, such as in their’s and their client’s case. While the Upper Tribunal agreed, it concluded that the tax guidance was only exactly for that – guidance. Instead, relevant law should be looked at when evaluating tax relief claims. In other words, whatever’s written in the HMRC manuals are merely how HMRC interprets the law, and are not tools to uphold rules and regulations.

According to Judge Sinfield, “We must interpret the legislation in accordance with the principles of construction described above, and if we conclude, as we have, that the legislation bears a different meaning to that found in the HMRC manual, the legislation must be preferred.”

This year, as Brits are challenged by the effects of the Coronavirus crisis, people are looking for ways to have as much cash on hand as possible. One of the channels through which this can be done is through tax relief. So far, the government has already rolled out programs that the enforced lockdowns halt aid individuals and businesses as their incomes.

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However, it seems that it cannot be expected of HMRC in relation to SIPP tax relief. Even though technically speaking, non-cash assets make up for the however amount of cash they are valued at. In the meantime, this seems to be the decision that will be upheld. While Sippchoice said that they are committed to pursuing the implications of HMRC’s tax guidance, the process might take longer than expected, and thus individuals with non-cash asset contributions would have to wait longer. 

If you want to learn more about the discussion of this HMRC Case, you can get in touch with Annette & Co. for FREE business advice. Better yet, you can tune in to my Podcast – Uncover Wealth Radio – where I also talk about the latest updates on UK Businesses and also COVID-19 every workday at 11 in the morning. You can also join my exclusive Facebook group that talks about a lot of business matters and UK businesses,

For more information about this matter, be sure to check out Episode 130 of Uncover Wealth Radio. If you’ve missed the LIVE broadcast, you can always revisit the episode here on our website, Annette & Co.

Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.

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