Pensions experts are warning advisers not to take advantage of a loophole in the Finance Bill 2007 which allows hold-ers of small self-administered schemes to avoid paying inheritance tax, saying that legislation will be introduced retrospectively.
Pensions experts are warning advisers not to take advantage of a loophole in the Finance Bill 2007 which allows holders of small self-administered schemes to avoid paying inheritance tax, saying that legislation will be introduced retrospectively.
The Government said in the last Budget that it is intending to impose similar penalties to the 82 per cent tax charge on death benefits for alternatively secured pensions to prevent SSASs being set up to pass on assets to family members while avoiding IHT.
Standard Life head of pensions policy John Lawson says the lack of legislation to imp-lement a penalty was a shock omission from the Finance Bill 2007 and creates an “enormous loophole”.
Lawson says this will create an unlevel playing field between the treatment of scheme pension residues and Asp residues in the short term.
But he warns advisers not to take advantage of the loophole because HM Revenue & Customs has confirmed that IHT charges will be imposed on scheme pensions at a later date and will apply retrospectively.
Lawson says: “Although this looks like a loophole that you could and should use, advisers should not touch it. Do not go within a million miles of this as they will be closing the loophole at some point.”
Rowanmoor director David Seaton says: “Ministers have gone totally over the top on this matter. There was never an issue here. I would not call it a loophole because I do not believe this is inheritance tax avoidance.”
In response to Lawson’s concerns, an HMRC spokesman said: “I refer you to paragraph eight of the Budget day consultation paper which says that “the provisions will apply to all existing arrangements that have been put in place that will enable capital to be passed on death to connected persons”.