Crackdown on asset-backed pension contributions

Changes introduced in Tuesday's Autumn Statement to restrict tax relief on asset-backed contributions to pension schemes are likely to make the schemes less attractive to large companies, reports Nick Huber.

The new limits on tax relief for asset-backed pensions contributions were set out in draft clauses for the Finance Bill 2012, but came into effect from the date of the autumn statement on 29 November 2011. The changes follow a consultation on the pension scheme earlier this year and are expected to save the government almost half a billion pounds in tax relief a year.

In his Autumn Statement earlier this week Chancellor George Osborne said the move would stop “some large firms using complex asset-backed pension funding arrangements to claim double the amount of tax relief that was intended.”

The new rules on tax relief are intended to “reflect accurately the total amount of payments the employer makes to the pension scheme directly or through a special purpose vehicle, for example a partnership,” HMRC said in a statement.

Transitional rules will apply to existing arrangements that have already received tax relief, the government said.

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