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Local tax inspectors to get contribution control

An Inland Revenue plan to give discretion on qualifying pension contributions to local tax inspectors after A-Day is raising concern among advisers and product providers.

From April 2006, the level of qualifying pension contribution will be placed at the discretion of local tax inspectors as annual contribution ceilings are abolished, a move which advisers are branding as “the death of pension simplification”.

The rule, which already applies to salaries to stop small businesses paying family members high, unjustified wages to avoid tax, is to be extended to companies.

Pension professionals are concerned that local tax inspectors have no experience of monitoring pension contributions and there has been no word from the Revenue on when, if at all, any guidance will be offered to the industry.

Central Tax & Trustee Planning director John Eburne says: “Even a contribution of less than salary may not qualify. It is entirely down to the discretion of the local inspector of taxes. The dark forces of conservatism within the Revenue appear to have derailed simplification before it even started.”

Standard Life senior technical manager John Lawson says that he has asked the Revenue to produce a guidance note for the pension industry but nothing has been forthcoming.

He says: “We are in for carnage. Local tax inspectors have never had experience of assessing pension contributions before and it is a big issue.”

An Inland Revenue spokes-man says: “Guidance on the proposed changes will be issued to staff in due course.”

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