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Advisers face £5k fines over tax loopholes

Pension advisers could face fines of up to £5,000 if they fail to disclose tax avoidance measures they take to reduce the impact of the special annual allowance measures introduced in the Budget.

Pensions have previously been exempt from anti-tax-avoidance measures but Standard Life head of pensions policy John Lawson says that new regulations coming in from September 1 mean advisers and their clients could be liable for fines from HM Revenue & Customs.

Any adviser that promotes or uses a loophole to get around the special annual allowance changes that came into force under the anti-forestalling measures in this year’s Budget, could face fines and clients could also be liable.

The Finance Act 2004 sets out the terms under which people not disclosing tax avoidance activities can be charged. A person who fails to comply with any of the provisions will be liable to “a penalty not exceeding £5,000”.

If the adviser continues failing to comply with the rules after a penalty is imposed, they will be charged a further penalty of up to £600 for each day they fail to comply. Clients who use these loopholes will also be liable for penalties.

Lawson says: “This is the first time that any sort of pen- sion scheme has been associated with tax avoidance. I think a lot of people are not aware of these regulations coming in. They could be caught out by them.

“There are a few clever wheezes that people have already come up with to get around the special annual allowance but advisers and other professionals will be fined up to £5,000 if they promote this without disclosing it to HMRC.”

Anand Associates financial architect James Brooke says: “I think it is a danger area for advisers to watch out for. Advisers who are getting into this area of tax avoidance who are not aware of these requirements are in very grave danger of finding themselves facing a fine. They are also at serious risk of the FSA not finding them fit or proper.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. Special Annual Allowance
    The article repeats the amount of £5000 four times without giving any idea of what exactly is the issue. How about an example?

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