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HMRC confirms Freedom client will not incur tax penalty

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

Money Marketing revealed last week the High Court had ruled to wind up the troubled Sipp operator. PricewaterhouseCoopers has been appointed liquidator.

Generally, a pension provider in this situation will be immediately de-registered 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 of 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.”

HM Revenue & Customs applied to have the Sipp provider 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 on Wednesday last week after an earlier winding up hearing on September 23 was adjourned.

At February last year, Freedom Sipp held assets worth £165m for around 350 members. Freedom Sipp director John Quarrell estimated the firm had around 150 members still invested last week.

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 proven difficult for many.

Freedom Sipp’s head count has reduced significantly since the FSA investigation began and the majority of staff are now working from home.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. I find it difficult to square of HMRC’s view on this when I consider their response to ISA investors who Keydata Secure Income Plans who have been told the interst they thought was tax free is now taxable because of Keydata’s screw up!

  2. Anons’ post above was exactly what I was thinking…….

  3. Perhaps the right answer to the wrong question. The scheme assets could be reduced by 40% thus reducing the member’s transfer value. It is correct that the member will not personally incur tax on the transfer value, but this is not the same as saying that a scheme tax cannot be passed on to the member’s share of the assets before that transfer value is calculated.

  4. I question is whether the member will manage to get another provider to take over the responsibility – this was apparently impossible to achieve just before the Court hearing, and you have to wonder how the transfer of assets would be achieved. A second question is whether HMRC will take a different view once Freedom has been deregistered.

  5. I called HMRC (APSS) on this point and they told me that the article is factually incorrect!! They wouldn’t comment any further and so I am none the wiser

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