Small Self Administered Schemes and In-Specie Contributions

In-Specie tax relief has been blocked by HMRC for 26 SSAS and SIPP firms.

Small Self Administered Schemes and SIPPs are governed by tight rules set by HMRC. As specialist SSAS administrators it is our job to keep up to date with changes in legislation, or specific actions from HMRC that affect these schemes. This article looks at a recent issue regarding in-specie contributions, where HMRC has refused to give tax relief to 26 firms who provide SSAS and SIPPs.

What is an in-specie Contribution? Why has HMRC blocked tax relief on it? What does it mean for Small Self Administered Schemes?

In-specie simply means ‘in its actual form’. So when it comes to pension schemes, an in-specie contribution is when an asset such as property or shares from outside a pension scheme is transferred into a pension scheme in its actual form rather than selling it and using the cash proceeds to fund the contribution.

In-specie contributions are not an especially common practice. When they happen, however, the scheme administrator claims basic rate tax relief from HMRC, whilst any tax relief above the basic rate is claimed by the scheme member(s) from HMRC, as is the case for cash contributions.

It was this practice that HMRC had challenged, which led to many SIPP and SSAS firms stopping accepting in-specie contributions. This was because HMRC had refused to give tax relief on these contributions to 26 SIPP and SSAS firms for the 6 months up to 5th September 2016.

As we understand it, HMRC has not really explained its decision, but the implication is that firms have not been following HMRC’s guidelines and that this is what prompted them to act. Our position is that we will not accept any in-specie contributions into our SSAS’s where we are the Trustee and Administrator, considering what is going on with HMRC.

The outcome of this situation remains to be seen as it appears to be unresolved. However, we will be keeping a close eye on it, and will report back on the outcome. Suffice it to say that high level discussions, chaired by law firm Pinsent Masons, have been held to decide the best route forward for the industry.

Contact us or call us on 0121 693 0690 if you have any questions about in-specie contributions and Small Self Administered Schemes.

 

 

0 comments on “Small Self Administered Schemes and In-Specie Contributions
  • SSAS and Legal Entity IdentifiersWhat are Legal Entity Identifiers and Does Your SSAS Need One? From 3rd January 2018 it will be a requirement for legal entities and structures to obtain a reference called a Legal Entity Identifier (LEI) from the London Stock Exchange in order for the trustees of a SSAS to carry on investing. This» Read More
  • Mr M.P.On retirement, I had a mixture of personal pensions, the remains of a final salary pension scheme and a pension fund pot from a Group Money Purchase Scheme. I was uncertain as to what I needed to do and how to go about doing it, which led me to turn PML for honest advice and guidance. PML sorted out my complex pension arrangements.
  • How a SSAS helped a business to expandOur client wanted to expand The opportunity arose for our client to acquire and develop a plot of land adjacent to their business premises.  This coincided with an ambition to purchase an expensive item of machinery to assist in the Company’s ambitions to expand. The Company had insufficient funds to do» Read More