Pension scheme rules are complicated, and they are constantly changing. It is thus essential that clients take advice from a qualified independent financial adviser before drawing funds from their pension scheme, or using those funds to invest in business assets.
Mr and Mrs O’Mara had a successful mortgage broking company. They took advice from a pensions adviser (Mr Lau) who they believed was registered by the Financial Conduct Authority, and they took steps to check his qualifications.
Lau advised the O’Maras that they could transfer their pension savings into a “Bespoke Pension Trust”, which would lend the funds to their company to use for business purposes. Unfortunately, as the O’Maras controlled their company, a loan from the pension fund to their company was treated as a payment to them personally, as beneficiaries of the pension fund. This payment amounted to an unauthorised payment from the pension fund and attracted a surcharge of 55%.
Wren Press Ltd was a small printing company which had a SASS pension scheme. In September 2006, it arranged to sell its printing presses to the SASS and lease the equipment back. This transaction was permitted under the rules which applied before 6 April 2006, but the A day rules prohibited the SASS from holding tangible moveable property.
The directors of the company believed that the printing presses were fixed assets as the lightest weighed around 4 tonnes, and they could not be moved easily. However, the tribunal found that the printing presses were tangible moveable property as it was possible to move them. The sale and lease-back transaction thus triggered an unauthorised payment surcharge and a sanction charge for the pension scheme.
Written by the Tax Advice Network