Freedom clients face £66m tax hit
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Freedom Sipp clients could be hit with a tax charge of £66m if the High Court decides to wind up the firm at a hearing next week.
HM Revenue & Customs has applied to have the Sipp provider wound up. This is believed to be due to a dispute involving outstanding VAT payments.
Freedom Sipp has been closed to new business since September last year.
The FSA changed the firm’s permission in July after finding it failed to seek the right customer authorisation before moving funds and also failed to notify customers of charges deducted from their funds.
If HMRC’s application to have the firm wound up is accepted, it is likely to de-register the pension scheme, triggering an immediate 40 per cent tax charge on all assets.
Terms and conditions state this would be passed to the firm’s clients. At February last year, Freedom Sipp held assets worth £165m for 350 clients.
Clients could escape the tax charge if another Sipp firm took over as scheme administrator of Freedom Sipp although the timescale and due diligence make this unlikely.
Members can transfer out before the hearing but those holding commercial property may not have time.
Hargreaves Lansdown head of pensions research Tom McPhail says: “Investors may suffer a very substantial loss of assets they have spent decades building up through no fault of their own.
“This, on a personal level, would be just as catastrophic as many of the final salary scheme failures that we have seen in recent years.”
HMRC refused to comment on the court case or the consequences of a wind-up. Freedom Sipp was unavailable for comment.
An FSA spokesman says: “We have made customers of Freedom Sipp aware of this court case and its implications and have urged them to consider their options.”
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