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Brown feared Revenue liability on Sipps

Chancellor Gordon Brown did not ban residential property in Sipps outright as he was worried about the poss- ibility of the Revenue being sued, says Sipp administrator Hornbuckle Mitchell.

Hornbuckle managing director Mark Stubbs says the Chancellor was concerned about the Revenue’s position after it publicly stated that Sipp investors could buy off-plan residential prop- erty in anticipation of A-Day, despite the asset never appearing on its permitted investment list.

Brown’s pre Budget report shock U-turn on Sipps last week did not ban residential property but he made it deeply unattractive as an investment by stripping away the tax relief and adding a 40 per cent tax surcharge, along with a 15 per cent trustee charge that would be passed on to the client.

Stubbs says: “The Government could not ban residential property because it would have embarrassed the Revenue and it would have been sued, so it just changed the tax relief on it, which effectively banned it.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “There were many reasons contributing to Brown’s decision but it boils down to the Treasury being backed into a corner and having to come up with a holding strategy, not an outright ban, that can be returned to in the future.

“I expect further nego- tiations to take place with the industry with scope for the possible return of cer- tain benefits.”

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