TaxPersonal TaxSIPPs u-turn spoils City’s Christmas

SIPPs u-turn spoils City’s Christmas

City bonuses struck by chancellor's reversal on pension tax breaks

The chancellor’s shock u-turn over allowing residential property to be used
in self-directed pensions could leave City directors scrambling to find new ways
to reduce the tax hit on Christmas bonuses.

Monday’s pre-Budget report saw Gordon Brown abandon plans to give tax breaks
on investments in residential property as part of self invested personal
pensions. In his speech, the chancellor said he wanted to stop the ‘misuse’ of
such SIPP schemes to purchase second or holiday homes, following fears that the
take-up could fuel house price inflation.

But the change of heart has left City directors with little time to sort out
the destination of their bonus, and few options of where to put it.

Alistair Kendrick, a partner at Wilder Coe, said that many directors had been
contemplating property investments in SIPPs as an alternative destination for
bonus payments since the use of overseas trusts to reduce tax exposure had been
largely closed down.

‘At a stroke this disappears,’ he said. ‘This leaves many directors with 31
December year-ends struggling to come up with any novel ideas of how to minimise
their tax.’

Investments in antiques or historical works of art were potential other areas
for the bonuses to go into, he suggested. The move may also add further problems
to the impending crisis of pension investments.

Phillip Wood, director of personal finance planning at
PricewaterhouseCoopers, said the move was likely to mean that ‘not so much money
goes into pensions in the next few years than perhaps would have done if it
could have been invested in property’.

Related Articles

HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

2w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

4m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter
HMRC tax evasion assistance requests double in five years

Corporate Tax HMRC tax evasion assistance requests double in five years

5m Emma Smith, Managing Editor