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[ASB]

There are some circumstances where a pension fund can make loans. They are pretty limited but I believe an employer can under some circumstance borrow the cash from the pension fund.

I was thinking maybe something like:-

Pay employee minimum wage.
Pay balance into pension fund.
Employer borrows from pension fund
Employer makes back to back loan to employee

I suspect there are a whole host of hurdles to jump in order for the loan not to be taxable - at least at a point it gets written off. But I suspect the objective is to, in effect, get the pension money into the employees hands now rather than when they reach pensionable age.

As to whether it can be effective. I haven't got a clue. I imagine it will be effective until challenged. Probably not after that.

The tax planning industry will still be coming up with all sorts of jolly wheezes. Some may work for a limited period of time. Some people will go for them, but it is not exactly a risk averse method of moving forward.

Edit: there are also of course "unlock your pension now" type arrangements. In effect sellingpension rights to a 3rd part in exchange for something now. These could potentially be used to diver pension cash to a scheme member early - at a considerable cost no doubt.

Again, would it pass muster? Seriously doubt it, since the intent is clear. To get reward for employment to the individual now.

[cojak]

Partly.
What I am trying to find out is whether people have had experiance with this.
Without wishing to get banned, I was told the loan benefitiary would be the personal pension holder (ie: myself). I dont beleive they lend the money to the pension pot, I think the money is provided to the pension pot which in turn is lent to you. the charge comes from the gross amount invoiced for, which is in the single digit as a %. The question i wanted to understand is, assuming this was the case, who would have the recall rights on the loan, would it be purley the pension owner if they were the benefitiary. If so, then what are merits/dangers, tax implications of not recalling this loan, having a pension with such a loan debt, what is teh HMRCs view on this and does it impact any other pensions you may have?
Its all very well saying to ignore this scheme, which I will be, and direting my friend this this for advice, however doing a search on google doesnt show any discussions or advice on this, hence why I brought it up. This site should be an area to learn what is out there and why such schemes should be ignored / banned.

You were banned for repeatedly posting the name of the scheme provider. We have the debris of punters doing exactly what you are doing now and not listening to advise to ignore such schemes, crying in the HMRC Enquiries forum.

CUK no longer permits posters/salesmen naming schemes. Generic questions are permitted, specific ones aren't.

If you want to know why these schemes are a bad idea, find out if the scheme has a DOTAS number then have a look at that forum again.

[gareth1981]

I was thinking maybe something like:-

Pay employee minimum wage.
Pay balance into pension fund.
Employer borrows from pension fund
Employer makes back to back loan to employee

I suspect there are a whole host of hurdles to jump in order for the loan not to be taxable - at least at a point it gets written off. But I suspect the objective is to, in effect, get the pension money into the employees hands now rather than when they reach pensionable age.

As to whether it can be effective. I haven't got a clue. I imagine it will be effective until challenged. Probably not after that.

The tax planning industry will still be coming up with all sorts of jolly wheezes. Some may work for a limited period of time. Some people will go for them, but it is not exactly a risk averse method of moving forward.

Edit: there are also of course "unlock your pension now" type arrangements. In effect sellingpension rights to a 3rd part in exchange for something now. These could potentially be used to diver pension cash to a scheme member early - at a considerable cost no doubt.

Again, would it pass muster? Seriously doubt it, since the intent is clear. To get reward for employment to the individual now.[/QUOTE]

Thanks again ASB, this was what I was looking for.

[gareth1981]

You were banned for repeatedly posting the name of the scheme provider. We have the debris of punters doing exactly what you are doing now and not listening to advise to ignore such schemes, crying in the HMRC Enquiries forum.

CUK no longer permits posters/salesmen naming schemes. Generic questions are permitted, specific ones aren't.

If you want to know why these schemes are a bad idea, find out the scheme has a DOTAS number then have a look at that forum again.

Repeatedly…? You mean 3 times... the 'punters' you allude to, are not all doing what I am doing, I am asking questions as to the validity and logic behind such a scheme, what I am doing is also listening and taking advice. Through discussions on boards of this nature, as ASB has politely set forth, information and arguments are provided to advise myself but also anyone else coming across such schemes.
This very information actually helps people steer clear of such damaging schemes. Again, not that you will believe me I fear, I am not a salesman nor a poster, just someone who has been told about this scheme through a colleague and wanted to know the facts. Certainly will look at the DOTAS number, however I think from ASBs advice my decision has been made.
Cheers

[v8gaz]

As to whether it can be effective. I haven't got a clue. I imagine it will be effective until challenged. Probably not after that.

Is that the same as "it's not stealing until you get caught" ?

[v8gaz]

what I am doing is also listening and taking advice.

No. You're not.

[eek]

Repeatedly…? You mean 3 times... the 'punters' you allude to, are not all doing what I am doing, I am asking questions as to the validity and logic behind such a scheme, what I am doing is also listening and taking advice. Through discussions on boards of this nature, as ASB has politely set forth, information and arguments are provided to advise myself but also anyone else coming across such schemes.
This very information actually helps people steer clear of such damaging schemes. Again, not that you will believe me I fear, I am not a salesman nor a poster, just someone who has been told about this scheme through a colleague and wanted to know the facts. Certainly will look at the DOTAS number, however I think from ASBs advice my decision has been made.
Cheers

Read http://forums.contractoruk.com/hmrc-...e-schemes.html and https://www.gov.uk/government/upload..._avoidance.pdf

Then think through the logic behind the proposal which is that HMRC don't like dodgy schemes and are now attack them with vengeance and no care to justice. (Don't doubt this will pass because no MP will like to be called a friend of tax dodgers and anyone voting against this bill won't be able to deny it). Plus there is an election next you. Any MP seen to act against this bill will have a very unfriendly electorate to face...

Then just go and find a proper umbrella or get your accountant to set up a limited company for you. At least you will know that the money you receive is always going to be yours...

[ASB]

Is that the same as "it's not stealing until you get caught" ?

No, because everything needs to be determined in order to decide.

But, I think anybody would likely have a very hard job persuading HMIT that they had taken reasonable care. This would lead to penalties. They may argue it was negligent. Higher penalties, and so on.

However, if a consumer can show a genuine belief it works, good luck to them. But convincing HMIT of that would be very tricky.

[LisaContractorUmbrella]

This from HMRC:

Loans made by a pension scheme
The following loans from a pension scheme will be unauthorised payments. Loans to a:
scheme member
person or company connected to a member
person or company connected to a scheme employer
But a loan to a scheme employer will be an authorised payment as long as it meets the conditions described below.
Broadly a connected person is a relative, spouse or civil partner of the member. A company is connected to the member if the member has control of it.
A loan from an occupational pension scheme to one of the scheme’s employers will be an unauthorised payment unless all the following conditions are met:
The loan can’t be for more than five years.
Interest charged on the loan must be at least one per cent above the average base lending rate of the leading high street banks.
The loan must be secured as a first charge against assets of at least equal value to the loan plus the loan interest. There must be no other charge on any asset that takes priority over the pension scheme’s charge.
A charge is the legal right of the lender (the scheme) to be paid from the asset if the debt isn't paid on time.
The loan can’t be more than 50 per cent of the net value of the scheme assets.
The terms of the loan must require it to be repaid in equal annual instalments.

I am no expert on pensions but this would seem to suggest that there would be no benefit to a contractor if the loan from the pension scheme was paid across according to HMRC guidelines; if the mechanism is creating a sham arrangement which serves no purpose other than to avoid tax then the contractor could expect a roasting from HMRC sometime in the near future.

[ASB]

There would be less than no benefit. There would be a huge and expensive problem. But of course we are just theorising as to what it might be.

If an unauthorised pension payment is made it attracts a tax rate of 55%. Essentially if anything come out of the pension before the age of 55 then it is likely to get scrutinised by HMRC due to the reporting requirements. Which of course trustees will follow. I suspect it may also cause issues for whoever made the contribution, if it is so transparent there could easily be a subsequent argument as to whether it was deductible for CT purpose to the payer.

I would be interested to know the actual details of what they propose; but I doubt that will happen.

Another issue of course is that any failure for tax planning purpose doesn't change what happened, or the treatment of the funds. It just changes the taxation of it, so it is perfectly possible to end up considerably worse off even before penalties.