SIPP providers have raised concerns over the way Her Majesty's Revenue and Customs (HMRC) collects information about eligibility for pension tax relief.
The Association of Member Directed Pension Schemes (AMPS) is questioning HMRC's practice of charging interest on tax relief it believes schemes have claimed incorrectly.
Members of SIPPs must fill out relief at source (RAS) declaration forms, to certify they are entitled to tax relief which is automatically credited to their scheme to be distributed by the administrator.
However, AMPS chairman Robert Graves said some SIPP providers have been told by HMRC their RAS forms are not sufficient.
This effectively means SIPP members have not declared they are eligible for tax relief at source and so all tax relief provided to the scheme already is seen by HMRC as 'inappropriate'.
HMRC then charges interest on this 'inappropriate' tax relief until schemes have their members sign adequate declarations.
This means in situations where members were eligible all along, the interest accrued on the tax relief is still outstanding and must be paid by the scheme administrators to HMRC.
Graves said this is unfair as in most cases schemes and members had not intended to obtain tax relief members were not entitled to.
"There is no HMRC template for RAS declarations and some member schemes have had their forms pulled up for being just a few words short," said Graves.
He explained there may also be some implications for SIPP investors if their declarations were insufficient.
"If a RAS declaration was very deficient and did not mention investors must inform HRMC if they become non-domiciled, and an investor has lived abroad for a few years, they may find when asked to fill in a new RAS declaration that they have tax relief to pay back," Graves said.
Graves said AMPS has asked members get in touch with the trade body if they have been subject to such audits.
AMPS has also been in touch with HRMC to seek clarification over the interest charges in these cases.
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