UK - Schemes that breach Inland Revenue guidelines will not automatically lose their tax privileges under changes being brought in as part of simplification, delegates at a recent conference were told.
Inland Revenue pension scheme services team leader Les Shaw explained that at present, schemes had to seek Revenue approval to gain tax privileges and if they breached the rules – no matter how minor the infringement – they risked losing them entirely.
Schemes that lose these privileges are taxed 40% on the value of all their assets.
However, after April 6, 2006, new schemes will have to register themselves with the Revenue to gain tax exemptions while schemes that already have approval will be registered automatically.
The Revenue will be able to focus on any scheme transaction and, if it breaches the regulations, it can punish them with a series of “intermediate sanctions”.
The penalties will be comparable to those contained within the rest of the tax system, starting off with a 100% tax penalty charge, which will be mitigated depending on size, gravity and level of scheme co-operation.
Shaw added: “Currently, we approve schemes and if they do something heinously wrong, we can withdraw that approval.
“Under the new rules, they register with us and if they do something horrendous we can then knock them out of the system. It is the most draconian measure we have, and we’ll also have new intermediate sanctions. There will be a tax charge, but it won’t be as draconian as withdrawing approval from the whole scheme.”
Additionally, Shaw hit out at industry suggestions that tax simplification had been delayed due to political pressure and claimed it was put back at the request of the industry.
He added: “Things are going forward, nothing has changed. The date of implementation has been put back because that is what the industry wanted – it’s not been railroaded by the Revenue or ministers, we’ve just taken note of the consultation.”
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