Tax request after selling pension

ess0two

I'm posting on behalf of sister in law.


4 yrs ago against all advice she sold her pension to a company overseas for 38k.
Fast forward to now and HMRC have been in touch and want 26k in tax for the sold pension.
She's asking me if theres a way to avoid this to which I laughed...I've googled and can't find anything remotely advisable for her.
Does anyone have any info in terms of avoiding this? can she claim she was unware of the consequence etc etc,if they don't buy this will a payment plan be set-up??


Advice appreciated.

xylophone

https://www.gov.uk/guidance/pension-schemes-and-unauthorised-payments

http://www.ftadviser.com/2015/04/07/pensions/personal-pensions/hmrc-stands-strong-on-tax-position-for-scam-victims-mksgjRzpnON1PZzKMlkPNP/article.html

may refer?

atush

She did a silly thing and now has to pay the 26K. You cannot legally 'sell' a pension.

She can write to HMRC and ask if they will agree to a payment plan. But I would not put money on them doing so in her case.

jamesd

It appears that she broke the law in spite of being told not to do it and as usual for law breakers is now liable for the penalties for doing so. Her lying to HMRC about being unaware of the consequences won't do any good because she still broke the law and HMRC still is obliged to collect the money from her. And they will know she lied, which is not the way to start a discussion about getting time to pay. HMRC now has centralised systems and the debt collection team will have access to her past tax returns, employer information and such, so she must not try to mislead them about her situation.

She should pay HMRC as soon as practical. If she can't do it all immediately she will need to come to a payment arrangement with them to stop them passing it on to debt collectors and/or taking legal action to enforce the debt.

HMRC are normally willing to make payment arrangements if there is any prospect at all of that meaning that payment can be made in a reasonable number of months or sometimes years. If not then they will probably go after her assets instead. Something like taking out or increasing a mortgage can be a better alternative to having HMRC go after her assets. She must ensure that she doesn't get a payment arrangement that she can't keep up with, HMRC appear to dislike agreements being broken. If for some reason it becomes clear that she is going to break an arrangement it'd be best to seek to come to another one with HMRC first. So long as it's clear to them that she's trying hard to pay they are likely to be reasonably understanding. Reasonably understanding doesn't mean kind or generous, their job is to collect the tax as rapidly as they can.

In addition to HMRC she may face action by a pension scheme to recover the Scheme Sanction Charge that HMRC may have charged them. It's not unusual for transfer requests to contain an indemnity clause that entitles them to do this.

One thing she must not do is ignore this. HMRC has very strong powers to recover tax and penalties and doesn't hesitate to use them when people just ignore demands for payment.

Even if she can't give any specific numbers about how much she can pay now she should contact them and ask for time to work out what she can pay. That will get her some more planning time before they start to charge penalties. She might try asking for a lower payment arrangement than she might be able to make later and a review in three months when she has had time to sort through her options. That at least demonstrates to HMRC some willingness to pay and may put her in the cooperating instead of trying to avoid group. Much better place to be!

ess0two

She's spoke to HMRC today, they need a full tax return doing,also asked her did she know if she'd paid any tax on initial lump sum payment.

dunstonh

4 yrs ago against all advice she sold her pension to a company overseas for 38k.

oh dear. Looks like she has been party to a scam by carrying out an unlawful transaction.

Fast forward to now and HMRC have been in touch and want 26k in tax for the sold pension.

Which is in the broad timescale that HMRC usually deal with it.

She's asking me if theres a way to avoid this to which I laughed...I've googled and can't find anything remotely advisable for her.

Effectively she has committed tax fraud. So, there is no way to avoid it. However, HMRC will often consider a repayment period if she can show she has no funds and is in hardship.

can she claim she was unware of the consequence etc etc,if they don't buy this will a payment plan be set-up??

Ignorance of the law is not an excuse. Plus, the transaction requires the involvement overseas companies acting unlawfully. What excuse could she dream up claim she was unaware.

Also, the pension warning flyers have been in every transfer out request for more than 2 years now. This contains the warnings.

jamesd

ess0two wrote: »

She's spoke to HMRC today, they need a full tax return doing,also asked her did she know if she'd paid any tax on initial lump sum payment.

Good to read that she's got in touch!

They are asking about tax because if a legitimate UK scheme made the payment they would have deducted the unauthorised payment charge before paying out the money. It's very unlikely that this is the case but it is her only real hope of avoiding the charge. If you can say roughly how much the initial pension pot value was we can work that out - whether there was 55% deducted before paying her the 38k or not.

ess0two

jamesd wrote: »

Good to read that she's got in touch!

They are asking about tax because if a legitimate UK scheme made the payment they would have deducted the unauthorised payment charge before paying out the money. It's very unlikely that this is the case but it is her only real hope of avoiding the charge. If you can say roughly how much the initial pension pot value was we can work that out - whether there was 55% deducted before paying her the 38k or not.

She's trying to find paperwork, but back of fag packet calculation was 46k pot, they took 8k to sort stuff as she's put it, leaving 38k.

Dird

66% tax rate? Has Jeremy Corbyn secretly been made PM?

Thrugelmir

Dird wrote: »

66% tax rate? Has Jeremy Corbyn secretly been made PM?

Tax is on the gross not the net.

xylophone

they took 8k to sort stuff

Does she mean that they charged her a fee?