Trustees of occupational pension schemes are unprepared for the sector’s new self-assessment scheme and face falling victim to a wider Inland Revenue clampdown on tax exemptions, experts warned this week.
All approved occupational pension schemes will receive a self-assessment tax form next month to determine whether they have a tax liability. Last year, only 20% of funds were subject to self-assessment.
Trustees are legally responsible for filling out tax returns. Authorised employer pension schemes are exempt from capital gains and income tax on investment, but not when trading to make profits.
But Anne Redston, a tax partner and pensions specialist at Ernst & Young, warned that many pension fund trustees would struggle to handle the complex tax affairs of pension schemes, particularly over property. ‘There is often a fine line between investment and trading,’ she said, adding that self-assessment could form part of a wider crusade against tax exemptions for pension schemes. ‘Pension funds are easy money for the government as no-one really understands what is happening. If the government starts to nibble away at tax exemptions, they become less tax efficient.’
These fears were echoed by the chief accountant of a #14bn occupational pension fund. ‘It’s another layer of administrative reporting and might not encourage employers to sponsor occupational pension schemes,’ he said.
According to the National Association of Pension Funds, UK occupational pension funds hold #800bn of assets.
Alan Pickering, vice chairman of the NAPF, said: ‘The Revenue is fishing in the dark because they haven’t issued tax forms for pension funds before. There is still an awful lot of detail in the forms.’
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