SSAS in the Spotlight

The Pre-Budget Report, November 2016 Suggests There has Never Been a More Important Time to Establish a SSAS. 

Two announcements by the Government last November regarding pension schemes and scamming along with a gradual reduction in the number of tax loopholes that are often used by businesses and high earners, means that use of tax planning and retirement vehicles is growing in importance. The Small Self Administered Scheme is one of these vehicles. Because a SSAS offers a high degree of flexibility when it comes to retirement, investment and death benefit options, we believe there has never been a more important time to establish a SSAS for business owners and their families.

Firstly, Anti Scamming Proposals

Pension scamming has been a growing problem since the introduction of pension freedoms. So it was good to hear two important announcements from the Government in this arena. Firstly consultation will start on anti-pension scam measures, one of which will stop SSASs using dormant companies as the sponsoring employer when being set-up.

Secondly, the Pensions Regulator warned consumers to always seek independent financial advice from approved, regulated companies as a matter of course when receiving cold calls, emails or letters offering what look to be too good to be true pensions schemes.

Further  Restrictions on The Use Of Qualifying Recognised Overseas Pension Schemes (QROPS)

For expats who return to the UK, all income paid from a QROPS will be subject to income tax rather than the current  90% at present, whilst HMRC will now monitor funds transferred offshore to a QROPS for 10 years rather than 5. This means that any retirement benefits withdrawn in that period will have to comply with UK tax laws.

In addition, the eligibility criteria for foreign schemes to qualify as a QROPS will be reviewed again, with the possibility that some schemes might no longer be recognised by HMRC.

The likely outcomes of all this is a curbing of the ability to manipulate the rules for overseas pension schemes, meaning that wealthy taxpayers will have to find suitable UK based alternatives, one of which is a SSAS.

The Closure Of Section 615 Schemes

Section 615 allow UK companies to set up workplace schemes for their overseas employees. They will be closed from April 2017 for new contributions.

These schemes are not widely known. However, for decades they have allowed members to access benefits such as open access to funds from age 18, generous contribution levels and the ability to take the entire fund as a lump sum. These benefits are not available under conventional UK pension schemes. The likely outcome is that overseas employees of UK companies will need to utilise conventional UK pension arrangements. Once again a SSAS is a good option because of the flexibility they offer regarding investments and benefits.

Inheritance Tax to be Charged On UK Residential Property Held By Offshore Structures

Inheritance Tax will be charged on all UK residential property indirectly held through an offshore structure with effect from 6 April 2017. Although designed primarily to prevent tax avoidance by the super-rich, the rules apply to all, so anyone trying to shelter their assets from Inheritance Tax will be affected. Once again, a SSAS is a sensible option.

Anti-Avoidance Penalty

The Chancellor has announced that the government will introduce a new penalty for those who enable tax avoidance. The proposals suggest that fines will be levied of up to 100% of the tax avoided or £3,000, whichever is higher. This general measure reinforces that legitimate tax planning such as pension saving is the way forward.

What does all this mean for SSAS?

As specialists in setting up and administering SSASs, we know that they have been an important investment vehicle for business owners, directors, executives and their family members since the early 1980s. This is thanks to the flexibility that SSASs have when it comes to investment and retirement options.

In our view, the announcements made last November are all favourable to a vehicle such as a SSAS. If you are considering a SSAS and would like to find out more, contact us or call us on 0121 693 0690.

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