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Sledgehead

Sipps Tax Benefit Lost In Revenue Changes

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In an article in today's Sun Telegraph, Money & Jobs section (can't find it on website) :

"HM REVENUE & Customs has dealt a huge blow to people hoping to take advantage of new rules that will allow them to put jewellery, art and antiques into pension schemes next year.

.... if a person has access to jewellery, fine art or wine while they are in a pensionscheme, they will be hit with a benefit in kind tax charge."

The annual charge will be = 40% of taxable value

where the taxable value = 20% of market value when put into pension

So a £10,000 necklace will attract a charge of 40% of £2000 = £800 (8% pa)

No similar charge will apply to property. Instead you will merely have to charge yourself (untaxed) rent - a kind of enforced saving as the rent is then stuck in th epension scheme.

Some saw SIPPS pension rule relaxations (being abl eto hold a wide variety of assets) as putting other assets on a more balanced footing with stock market assets. The real motivation is becoming clearer: a desperate attempt to shore up the sagging property market.

Edited by Sledgehead

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I'm still wondering if the government has the cash flow to add property into SIPPS pension. Where will it get the money from?

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In an article in today's Sun Telegraph, Money & Jobs section (can't find it on website) :

"HM REVENUE & Customs has dealt a huge blow to people hoping to take advantage of new rules that will allow them to put jewellery, art and antiques into pension schemes next year.

.... if a person has access to jewellery, fine art or wine while they are in a pensionscheme, they will be hit with a benefit in kind tax charge."

The annual charge will be  = 40% of taxable value

where the taxable value = 20% of market value when put into pension

So a £10,000 necklace will attract a charge of 40% of £2000 = £800  (8% pa)

No similar charge will apply to property. Instead you will merely have to charge yourself (untaxed) rent - a kind of enforced saving as the rent is then stuck in th epension scheme.

Some saw SIPPS pension rule relaxations (being abl eto hold a wide variety of assets) as putting other assets on a more balanced footing with stock market assets. The real motivation is becoming clearer: a desperate attempt to shore up the sagging property market.

I think there's a distinct sniff of paranoia here.

The tax charge that the Revenue appy is the standard calculation for benefits in kind if "market rent" is not paid. The example given is where someone doesn't pay market rent for the "use" of the jewellery. If they did a BIK charge may not apply (to be fair I'm not sure of exact rules!).

It's the same with property. Pay market rent and no tax charge applies, if you don't then you will be taxed on it.

Bearing in mind these new rules were published several years ago I doubt the intention was purely to "shore up the sagging property market" but could be a genuine attempt to simplify what is a complex area in pension provision. If it encourages more people to save rather then spend on their CCs then I believe that it will be a good thing.

The fact that the rules will allow residential property means that more people will be encouraged to save as they understand investing in property whereas investing in stocks and shares is still a mystery to some (even if now is not the right time to do so!).

This may not help a hpc but I believe it will help all of us in the long term by weaning people off reliance on the state.

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Maybe they were worried about people putting fine wine into their pensions and then drinking it all, leaving them with an alcohol deficit in later years that would need to be met by the government.

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Maybe they were worried about people putting fine wine into their pensions and then drinking it all, leaving them with an alcohol deficit in later years that would need to be met by the government.

They were worried that someone other than wealthy NuLab supports might actually benefit from this change.

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I think there's a distinct sniff of paranoia here.

The tax charge that the Revenue appy is the standard calculation for benefits in kind if "market rent" is not paid. The example given is where someone doesn't pay market rent for the "use" of the jewellery. If they did a BIK charge may not apply (to be fair I'm not sure of exact rules!).

It's the same with property. Pay market rent and no tax charge applies, if you don't then you will be taxed on it.

Bearing in mind these new rules were published several years ago I doubt the intention was purely to "shore up the sagging property market" but could be a genuine attempt to simplify what is a complex area in pension provision. If it encourages more people to save rather then spend on their CCs then I believe that it will be a good thing.

The fact that the rules will allow residential property means that more people will be encouraged to save as they understand investing in property whereas investing in stocks and shares is still a mystery to some (even if now is not the right time to do so!).

This may not help a hpc but I believe it will help all of us in the long term by weaning people off reliance on the state.

Would the distinctly unparanoid Big Al care to share with us his views on why company dividends attract taxation when held within a pension, even tho property will not attract tax on rents?

Would Big Al care to comment on why money is being lent to key workers and first time buyers to invest in property when that same money has been taken from the dividends of people who invest in companies?

Would Big Al care to comment on why the tax burden placed upon UK companies is now twice that experienced by the US:

cntax13.gif

Does Big Al feel this is a wise move? Does Big Al believe these taxes are well spent on shared ownership schemes?

Does Big Al think that reduced council tax on second home ownership to be a good use of these taxes?

Does Big Al think that the government's "Rent A Room" scheme, allowing home owners to rent a room tax free, to be a fair use of business taxes?

Does Big Al think it right that the government have doubled the tax free allowance on property stamp duty to £120000. Does he think these missed taxes are a good use of stamp duty charged on share purchases from th every first penny @ a flat rate of 0.5 per cent?

Does Big Al think there was any need to produce a tax wrapper for property when OO properties can be traded free of cgt in any case, as opposed to all other asset transactions?

Does Big Al feel I should continue to spill out my obviously paranoid ramblings?

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Would the distinctly unparanoid Big Al care to share with us his views on why company dividends attract taxation when held within a pension, even tho property will not attract tax on rents?

Would Big Al care to comment on why money is being lent to key workers and first time buyers to invest in property when that same money has been taken from the dividends of people who invest in companies?

Would Big Al care to comment on why the tax burden placed upon UK companies is now twice that experienced by the US:

cntax13.gif

Does Big Al feel this is a wise move? Does Big Al believe these taxes are well spent on shared ownership schemes?

Does Big Al think that reduced council tax on second home ownership to be a good use of these taxes?

Does Big Al think that the government's "Rent A Room" scheme, allowing home owners to rent a room tax free, to be a fair use of business taxes?

Does Big Al think it right that the government have doubled the tax free allowance on property stamp duty to £120000. Does he think these missed taxes are a good use of stamp duty charged on share purchases from th every first penny @ a flat rate of 0.5 per cent?

Does Big Al think there was any need to produce a tax wrapper for property when OO properties can be traded free of cgt in any case, as opposed to all other asset transactions?

Does Big Al feel I should continue to spill out my obviously paranoid ramblings?

1. GB's easy way to rob £5b per year from pension schemes under the guise that it would encourage companies to reinvest income instead of paying it out in divis.

2. Tax has to come from someone to pay for all these wonderful NL initiatives. Tax credits on divis is just yet another source for GB. A bit like the increase in stamp duty from the original 1% to the current bands we have now.

3. Not really, I have no idea but surely you have to compare the whole tax system and not just one area. We may be taxed more lightly in other areas than in the US.

4. I don't believe in the govt propping up the property market but at the same time I am concerned that key workers can't afford to buy in certain areas.

5. No

6. No

7. Yes. When I was a FTB I was fortunate to fall within the 0% tax band under £60k. I would want any FTB to be lucky enough to be in that same position.

8. Yes. The idea of the new rules was to "simplify" the pension system and that included what schemes can invest in. Yes, resi property gets swept up in these changes and this will have an impact on the property market but the point I ws making was that it is paranoid to think that these tax changes were brought in just to hold up the property market.

9. That's what the forum's for, feel free :-)

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1. GB's easy way to rob £5b per year from pension schemes under the guise that it would encourage companies to reinvest income instead of paying it out in divis.

2. Tax has to come from someone to pay for all these wonderful NL initiatives. Tax credits on divis is just yet another source for GB. A bit like the increase in stamp duty from the original 1% to the current bands we have now.

3. Not really, I have no idea but surely you have to compare the whole tax system and not just one area. We may be taxed more lightly in other areas than in the US.

4. I don't believe in the govt propping up the property market but at the same time I am concerned that key workers can't afford to buy in certain areas.

5. No

6. No

7. Yes. When I was a FTB I was fortunate to fall within the 0% tax band under £60k. I would want any FTB to be lucky enough to be in that same position.

8.  Yes. The idea of the new rules was to "simplify" the pension system and that included what schemes can invest in. Yes, resi property gets swept up in these changes and this will have an impact on the property market but the point I ws making was that it is paranoid to think that these tax changes were brought in just to hold up the property market.

9. That's what the forum's for, feel free :-)

Simplify? Why then are dividends taxed in pensions. When then will wine, art and jewellery be taxed if the investor as access to the asset? Why can't they just have the pension charge them a rental fee for access, just like residential property?

Now we find even council tax rebanding has been postponed.

Think about it: other than aviation fuel, name some aspect of our life more favourably taxed than resi property.

The way I see it, British business has been sold down the river on a populist ticket of rising property prices. In this respect we have borrowed from our future in almost every aspect of our lives.

Edited by Sledgehead

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Simplify? Why then are dividends taxed in pensions. When then will wine, art and jewellery be taxed if the investor as access to the asset? Why can't they just have the pension charge them a rental fee for access, just like residential property?

Now we find even council tax rebanding has been postponed.

Think about it: other than aviation fuel, name some aspect of our life more favourably taxed than resi property.

The way I see it, British business has been sold down the river on a populist ticket of rising property prices. In this respect we have borrowed from our future in almost every aspect of our lives.

Tax on divis came about in 1997 long before simplification was a twinkle in GB's eye. I can't see GB giving up £5b per year now that he's used to having it, even if it would help pension savers.

I've had a read of the Telegraph article (and the Revenue rules) and I think that if the member pays rent on art or jewellery then a tax charge will not apply. The article doesn't really cover this point.

Isn't some food and clothing vat free - is that more favourable. Even if property is one of the most favourably taxed, so what and why not?

I don't really understand your point about british business. NL have a liking for taxing business, I think it would happen with or without a property boom. In fact it could be argued that business has been let off lightly because if property prices had not increased (and thus the tax take through stamp duty) then business taxes could be higher than they are now.

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I'm still wondering if the government has the cash flow to add property into SIPPS pension. Where will it get the money from?

It doesn't 'come' from anywhere, you've fallen for all the **** and bull. It's a tax relief, say you recieve tax free interest from savings from an ISA for example has the government given you that money or have they just not taken it away?

Anyway, you need a very healthy pension in order to put property in a SIPP, you can't just leverage your way out of it, if you own a property your pension has purchase something like 50% of the cost IIRC. Also, you can't just go and sell it, not without having to pay back all that relief anyway, and you have to pay letting fee's and management charges on the SIPP itself and the trustees control the property, not yourself. It also has a lifetime allowance of £1.5m, so the £500k BTL that will double in five years then double again will suffer some whacking tax charges :lol:

SIPPS is more of a sentiment thing, they make out it is like some sort of ISA wrapper like you're able to drop an existing property in a magic box and avoid capital gains, the VI's have spun as much and even people on this forum have fallen for it, hence all the 'outrage'. In reality it's very inflexible and involves lots of complexities and expense, as the lady on that BBC programme found out.

Edited by BuyingBear

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It doesn't 'come' from anywhere, you've fallen for all the **** and bull. It's a tax relief, say you recieve tax free interest from savings from an ISA for example has the government given you that money or have they just not taken it away?

Ah, good point. I'll take my stupid hat off now!

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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