IR may knock at your door this Xmas
It might not only be carol singers knocking at your door this Christmas - Mrs Doyle may make an appearance too, Big Five firm Ernst & Young has warned.
The Inland Revenue is now rushing to beat its own tax filing deadlines in a bid to recover up to Pounds 2bn tax from pension funds. This must be done before the six-year window of opportunity closes, said E&Y.
Anne Redston, head of tax at E&Y’s financial services practice, said: ‘Many pension funds can expect to receive an unwelcome Christmas present from Mrs Doyle – a statutory declaration notice. Once the notice has been received, the fund has only 30 days to gather its arguments together and submit a formal declaration.
‘However the Revenue is not subject to the same tight timescale. They can take as long as they like to consider the evidence submitted by the fund and decide whether or not to take the pension fund to court.’
In the mid-1990s many pension funds undertook share buy-back transactions. At the time the government paid out a top-up tax credit to the funds, but now the Revenue considers that some of the tax credits recovered by the funds can be clawed back under anti-avoidance legislation.
Unless the Revenue issues assessments to all those that took out buybacks in 1995, before 5 April 2002, it will lose its chance to recover the money.
Redston, who won last year’s Personality of the Year award at the Accountancy Age ceremony, added: ‘Funds should be alert to the possibility that they may have to respond very quickly, and over the Christmas period, to this very demanding request for information about events which occurred over five years ago. If they fail to meet the deadline, they may have to surrender the tax credits, at a cost to their pensioners.’
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