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FSCS to pay out to Sipp Catalyst investors after tax delay

The Financial Services Compensation Scheme is to pay compensation to those who invested in failed life settlement firm Catalyst through a Standard Life Sipp after a six-month delay. 

Catalyst was censured by the FCA in October 2013 for misleading investors when promoting bonds issued by Luxembourg-based life settlement vehicle ARM Asset Backed Securities.

It trigged a £30m interim FSCS levy for investment advisers in 2013/14, which was later postponed until 2014/15.

In July, the FSCS said it could not make offers of compensation to those who invested in Catalyst through a Standard Life Sipp until it had resolved a tax issue with HM Revenue & Customs.

Where investments are made through a Sipp, the FSCS ordinarily requires the Sipp trustee to assign its interests in the members’ investments.

This enables the FSCS to pursue claims for recoveries and pay compensation directly to the investor.

But Standard Life raised concerns that an assignment of its interests could result in an “unauthorised payment” which might create a tax liability.

In an update published yesterday, the FSCS says it has received clarification from HMRC and can now begin making payments to affected claimants.

It has agreed a process whereby claimants give consent for Standard Life to provide the FSCS with a full legal assignment of the ARM assets. Compensation will be paid to the Sipp, meaning no tax liability is due.

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