On 17 May 2002 the Revenue published online its reaction to the Brand New Carpets Case. This case involves, together with similar cases, Revenue prosecutions for theft of pension scheme funds. It is alleged that dummy pension schemes have been used as vehicles to extract monies from genuine schemes, the monies then being transferred to individual and corporate accounts in complete disregard to the trust rules of the paying and receiving schemes.

“Update 132: Improper Transfers: Trust Busting Introduction

1. We suspect that funds are being extracted from pension schemes and that these extractions involve, as a first step, an improper transfer. These so called "trust busting" or "pension liberation" devices frustrate the purpose for which Parliament has granted generous tax treatment to approved pension schemes. These improper transfers deprive the pension scheme members concerned of all or part of their future pensions. Pension scheme members are being targeted and exploited by the promoters of these schemes who often charge 20% to 30% of the amount extracted in the form of commission.
2. IR SPSS is aware of concerns in the Pensions Industry that some members of approved occupational pension schemes, personal pension schemes and retirement annuity contracts are requesting a transfer of benefits and then taking benefits from the scheme receiving the transfer in a manner that is not compatible with Inland Revenue approval. Abuses of this kind undermine the purpose for which tax reliefs are given. The Revenue views this abuse of the pension transfer system extremely seriously.”

A Baxendale Walker MDP principle adds “I deal with pension transfers for BWS clients on a daily basis. It is vital to ensure that transfers are effected only between genuine pension arrangements and on a proper commercial basis. Every client pension transfer is undertaken only with the express written approval of the Revenue and the funds are always paid to an account in the mandate of an independent pensioner trustee.”

A BW MDP principle, who deals extensively with pension transfers in our Wealth Strategy Department comments: “The Revenue seem to be reacting unwisely to what is, by definition, an extremely limited problem. Any commercial activity is subject to the continuing risk of theft or fraud. When that risk matures, the proper response is to allow the criminal justice system to take its course. It is not really a matter of pensions practice or regulation at all. The Revenue is indeed known to be prosecuting in these cases. What I do find odd is the idea that the Revenue should be seeking additional tax from activities which it is prosecuting as criminal.”