Sipp experts have warned that a provider’s legal triumph in its battle with HMRC over in specie contributions is “not the end of the story”.

Industry professionals expect the taxman to appeal after the tribunal ruled in favour of Sippchoice.

The case revolved around whether contributions made by four members of a Sipp were ‘paid’ within the meaning of the Finance Act 2004 and therefore qualified for relief from income tax at source, as claimed by the firm.

An in specie contribution means non-cash, where ownerships of assets such as a property or shares are transferred in to pension scheme instead.

From 6 March to 5 April 2016 Sippchoice made a claim for relief from income tax at source relating to a contribution with a net value of £68,342 made by a client called Mr Carlton into a Sipp, which was constituted by a Trust Deed and Rules. The trust had been declared by Sippchoice on 6 April 2009. HMRC denied the claim for relief.

The company contested that decision and included the denied claim in its Annual Relief at Source claim. HMRC decided to refuse that claim and the firm appealed against that decision. In a ruling, released this week, Judge Gething sided with the Sipp provider.


Dentons Pension Management said in a statement that this was “not the end of the story since HMRC has the right to apply to appeal against that decision.” Dentons said HMRC’s challenging of the availability of tax relief on in-specie pension contributions in recent years has affected most, if not all, of the SIPP providers who have allowed in-specie contributions in the past.  
 
HMRC is yet to respond to FP Today’s request for a comment about the ruling, but it has been quoted as stating that “the current rules will continue to apply until we are satisfied that the litigation process is complete”.

Graham Muir, director of Talbot and Muir, said: “Whilst we welcome the ruling made by this tribunal, given HMRC's stated position and the prospect of an appeal, until such time as HMRC formally acknowledge the legitimacy of in-specie contributions we believe it is prudent to maintain our stance of not permitting this type of contribution.”

Jeff Steedman, head of SIPP/SSAS business development at Xafinity was pleased with the ruling, and said: “The SIPP/SSAS industry has been somewhat in limbo for 18 months and very few providers agree to transact these contributions for fear that tax relief would be withheld by HMRC. It is a helpful decision by Judge Heather Gething, but it is, of course, key that we wait to see whether HMRC appeal this decision.”

He said: “There are thousands of pension poor, cash poor, but asset rich business owners in the UK who have been denied the chance to use their £40k annual allowance and access carry forward allowances during this period. 
 
“Xafinity has a number of clients wishing to contribute commercial property in specie, and we hope HMRC will act swiftly to finally put this issue to bed.”

The judge said she believed the purpose of the post A-day pension legislation was to enable and encourage taxpayers to “provide for their retirement and to protect them from the tyranny of interest rates prevailing at the date of retirement”.

She said: “Preventing contributions in kind does not seem to be the mischief at which the legislation was aimed.”