Have I been offered a tax avoidance scheme?

22 February 2013

Q

I have been offered a transfer of my pension pot into an umbrella fund, which allegedly enables me to put my pot into a company run by me that can then loan me money to, say, pay off my mortgage and is tax-free.The set up fee is high (6%) and part of the fee is apparently a Lloyds TSB underwrite in case the government closes the tax loophole. Is this too good to be true?
From
DE, by email

A

This looks like what has become known as a 'Jimmy Carr' arrangement. HMRC is targeting schemes such as this that involve a number of complex steps to achieve what is effectively a tax-free income where tax would normally be paid.

Where HMRC deems schemes to be tax avoidance, then there are likely to be penalties plus the repayment of tax. Where it deems schemes to be tax evasion, then the consequences could be much worse.

I would suggest you leave this type of arrangement well alone.