Tax Avoidance Schemes – Disclosure regime extended to pension scheme arrangementsWednesday, July 29th, 2009
Promoters of tax avoidance schemes are obliged to disclose information about schemes that fall within specified descriptions within 5 days of the scheme’s being made available or implemented. Following disclosure, HMRC allocates a scheme reference number (SRN) to identify the users of the scheme and promoters must pass the SRN to their clients who, in turn, identify themselves as users of the scheme on tax returns or other documents.
From 1 September 2009, the list of descriptions of schemes that must be disclosed includes “the accrual or expected accrual of benefits in a pension scheme to or in respect of a person, and the main benefit of those arrangements is that
- the person would not be subject to the special annual allowance charge provided under Schedule 35 to the Finance Act 2009, or
- the person incurs the special annual allowance charge but at a lesser amount than would have been incurred if the arrangements had not been entered into.”
From April 2011, the tax relief on pension contributions will be restricted to the basic rate where an individual’s annual income is £150,000 or more. To prevent large sums being paid into pension funds in advance of April 2011 in order to obtain tax relief at 40%, transitional provisions were introduced from 22 April 2009 in the form of a “special annual allowance charge”.
The objective of this change to the disclosure rules is to require disclosure of tax avoidance schemes that seek to avoid or reduce the restriction of pensions relief in ways that Parliament did not intend.
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