It is currently unclear what action the Inland Revenue will take if you report a tax benefit regarding a SIPP before A-Day, the SIPP Provider Group warns.
The group says uncertainty still clouds a disclosure of tax avoidance schemes prior to 6th April 2006, which could impact portfolios, as it is likely tax approval will be withdrawn for certain types of investment until that date.
While the threat is removed after A-Day, further action by the Inland Revenue is even less clear, except in instances of unauthorised payments, the SIPP Provider Group says.
The tax avoidance disclosure legislation for pension schemes came into force in August 2004, making it necessary to disclose any tax avoidance schemes involving pension schemes.
However, according to the Sipp Provider Group, it has become apparent there is no specific definition of tax avoidance with advisers interpreting it to mean anything which fails the sole purpose test.
Martin Cadman, chairman of the SIPP Provider Group says: "We are still waiting on a large number of legislative clarifications in the run up to A-Day."
In the interim Cadman encourages IFAs to seek advice from an accountant or lawyer, wherever disclosure of tax avoidance involving a SIPP comes into play.
The Inland Revenue responded by stating the disclosure rules require disclosure of any scheme or arrangements which might be expected to provide, as a main benefit, a tax advantage where:
Legislation at present, however, specifically excludes:
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