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IFAs voice SSAS fears after court rules on executive&#39s tax-free cash

IFAs are warning that a court ruling that an executive director is not allowed to retire and take a tax-free lump sum if he remains a non-executive director in the firm could have serious ramifications for the small self-administered scheme sector.

The Court of Appeal overturned an earlier High Court decision in the case of Vena-bles •Hornby, ruling that Venables, who was an executive director and major shareholder, had not retired within his company&#39s pension scheme and was therefore not entitled to claim the tax-free cash.

The decision could see the Inland Revenue chasing other non-executive directors for tax on their lump-sum payments where they retain an interest in the running of the company.

The court decision will hit small businesspeople selling their business or passing it on to family members and is predicted to result in an increase in the demand to convert a SSAS into a Sipp at the point of retirement.

James Hay director of consultancy and former chairman of the Association of Pension Trustees David Sea-ton says: “This is a very nasty attack on pensions by the Inland Revenue.

“Advisers could be facing claims against them if they have not told their client that they must sever all relations with the company to receive tax-free cash.”

Marsh Williams Trustees managing director Ian Williams says “This ruling could hit the SSAS market as it will hit controlling directors in their ability to pull out of the business in an efficient way and still keep a hand on the tiller.

“Small businesses are the backbone of the economy and a lot of people rely on being able to sell their business to be able to retire.”


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