UK - The Society of Pensions Consultants is urging the Chancellor to tackle growing pensions taxation problems in his forthcoming Budget.
SPC secretary John Mortimer wants Gordon Brown to correct an “oversight” in the Pensions Act that means payments to rectify scheme deficits by an employer – whether solvent or otherwise – are subject to tax.
Mortimer says this clashes with legislation set out in the Income and Corporations Tax Act (ICTA) 1988, which states that debt payments should be treated as employee contributions and are not subject to tax.
Mortimer warned that this problem could become “very significant” as deficits rise.
He said: “The Inland Revenue has indicated that it would not seek to withhold tax relief in these circumstances, but we are not sure that the Inland Revenue technically has a basis on which to grant corporation tax relief to payments made under the new legislation.
“We therefore suggest that, for the avoidance of doubt, ICTA 1988 be amended to include reference to the Pensions Act 1995.”
The SPC also called for an end to the stamp duty reserve tax of 0.5% being imposed on the transfer of assets that takes place when schemes merge.
And Mortimer added that current bouts of speculation over the possible taxation of lump sums and the introduction of contribution limits are damaging due to the government’s refusal to deny them.
“The impression remains that if pensions are not touched this time, but may be next year, or the year after, the government is doing nothing to counter this impression.
“If the government appears uncommitted to supporting private pensions in the long run, it cannot expect individuals or employers to make such a commitment.”
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