08 December 2005

SIPPs change cancelled

Anger and dismay has greated Chancellor of the Exchequer Gordon Brown’s announcement that he will not now go ahead with a planned change to self invested personal pension rules that would from next April have allowed such schemes to invest in residential property.

Promise of the change, included in last year’s Finance Act, has encouraged the financial services industry to invest millions in developing appropriate SIPPs. All that has now been wasted.

True to form the Chancellor has pounced on the slightest hint of tax avoidance and in so doing will be making changes that were originally designed to simplify pensions law extremely complicated even before they come into effect. A ‘technical note’ – virtually the only reference to his decision to overwrite his SIPPs promises included in his Pre-Budget statement – sets proposals to deal with direct and indirect investment in residential property, and much more.

Although there had been a wave of protests that the property market would be distorted and things made tougher for first time buyers if changes to the SIPPs rules went ahead – something always denied by the Government ¬– the Chancellor gave another reason for the change of heart. It was ‘to prevent people benefiting from tax relief in relation to contributions made into self directed pension schemes for the purpose of funding purchases of holiday or second homes and other prohibited assets for their or their family’s personal use’.

Few thought there would have been much if any tax advantage in this anyway, since any use of second homes owned through a pension scheme would have been subject to taxation as a benefit kind.

More here.

No comments:

Post a Comment