In Sippchoice Limited v HMRC [2017] TC06378, the First Tier Tribunal (FTT) confirmed that a contribution ‘in specie’ paid into a SIPP in satisfaction of a monetary obligation amounted to a payment and so was allowable for Income Tax.
A member of a Self-Invested Personal Pension (SIPP) plan notified the SIPP of his intention to make a cash contribution to the plan. The trustees agreed that payment of that contribution could be satisfied by the transfer of shares with an agreed value matching the cash contribution due.
It was widely understood that a contribution in specie would be treated in the same way as cash and tax relief would be available in respect of contributions provided that they were made in line with HMRC Pensions Tax Manual paragraph PTM042100.
HMRC challenged the contribution. It argued that the expression 'contributions paid' in Part 4 Chapter 4 of FA 2004 should be given their natural meaning which would require the Tribunal to find it meant a 'money' payment.
The First Tier Tribunal decided that it was clear from Lord Hoffmann's statements in MacNiven v Westmoreland Investments Limited ('MacNiven') that satisfaction of a monetary obligation or debt in cash or kind, amounts to 'payment'.
It was satisfied that a legally binding monetary obligation to make a contribution had been created and discharged by the transfer of shares into the SIPP.
The appeal was allowed.
Comment
A scary case for the pensions industry and we shall wait to see if there is an appeal. It is curious for HMRC to challenge a contribution in specie. SIPPChoice and other providers may well be reviewing their paperwork to ensure that agreements are executed as deeds where relevant.
Links
Pensions: Tax rules and planning
Pensions are a tax-advantaged method of saving: funds inside a pensions wrapper are not subject to tax and so income and capital grow tax-free within a registered scheme, while contributions can attract tax relief.
DIY Small Self-Administered Pension schemes
An SSAS can be set up by an employer to provide benefits for members, usually on a defined contribution (money purchase) basis and run by solely by member trustees. You can create and run your own SSAS.
Pensions: Unauthorised payment charges
What is a pensions unauthorised payment? When does a tax charge arise? Who pays the charge?
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Sippchoice Limited v HMRC [2017] TC06378