Revenue rules no bill for Freedom Sipp client

29 October 2009 | By Helen Pow

HM Revenue & Customs has confirmed to a Freedom Sipp client that he will not be hit with a 40 per cent tax charge if he transfers his pension to another provider.

Money Marketing revealed on October 14 that the High Court had ruled to wind up the Sipp operator. PricewaterhouseCoopers has been appoin- ted liquidator.

Generally, a pension provider in this situation will be immediately deregistered by HMRC, triggering a 40 per cent tax charge on all assets. According to Freedom Sipp terms and conditions, this penalty would be passed on to clients.

But Money Marketing has seen written confirmation from the HMRC’s audit and pension scheme services division that a client will not incur a tax charge if they transfer the administration of their Sipp to another provider.

Prompted by the High Court decision, the client asked HMRC: “I am now proposing to move all my Sipp administration as quickly as matters can be progressed. I would also like to have assurances from HMRC that in doing so I will not incur any form of tax charges or penalties?”

Responding, an HMRC employee stated: “I can confirm that in making a transfer in the way that you have mentioned, no tax charges will be incurred.”

HMRC applied to have Freedom Sipp wound up due to a dispute involving outstanding VAT payments of up to £160,000, Money Marketing understands.

The case was heard by Justice Briggs last week after an earlier winding-up hearing on September 23 was adjourned.

In February last year, Freedom Sipp held assets worth £165m for around 350 members. Ear-lier this month, director John Quarrell estimated that the firm had around 150 members still invested.

Liberty Sipp, AJ Bell, IPS and Hornbuckle Mitchell are understood to have taken on some of the firm’s clients.

Freedom Sipp has been closed to new business since September 2008.

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.

Customers have been free to transfer their funds and encouraged to consider this option by the FSA since this date although this has proved difficult for many.

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