A BRITISH COUPLE face paying out tens of thousands of pounds in tax interest as a result of a botched offshore scheme that attempted to bypass UK pension requirements.
The UK’s Upper Tribunal has ruled that pensioners Neil and Megan Gretton must pay interest on a tax bill of £86,000 owed to HMRC for breaching offshore tax rules.
In 1996, acting on the advice of their financial advisor, the Grettons moved £231,000 of pensions funds held with Scottish Equitable into a retirement annuity trust schemes established in Guernsey.
The scheme would allow the Grettons to avoid having to buy an annuity with their pension funds and enabled the funds to be part of their estate on death.
In order for the scheme to be implemented in Guernsey, it was required that Grettons become resident in Guernsey or Alderney – a bailiwick of Guernsey. It was explained that it would be necessary to rent a property in order to establish a place of residence on the island.
In 2010, the taxman won a ruling that concluded that the pension fund transfers did not meet rules agreed between the UK and Guernsey as the couple never took up residence there despite acquiring the lease of a property.
The first-tier tax tribunal ruled that the Grettons should pay income tax owed as a result of the transfer, but decided they should be liable for penalties or interest on the amount.
Following an appeal by HMRC, the Upper Tribunal has ruled that the couple are indeed liable to pay interest on the sum.
The Grettons have decided not to challenge the appeal.
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