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Sam, Accountant
Category: Tax
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In 2010 I was approached by a company to help me to release

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In 2010 I was approached by a company to help me to release some money from my pension from my previous employer. As I had severe financial problems at the time I decided to mke use of their services. They told me that the amount they could get out for me was half the value of my pension fund an that it would be treated as a loan which could be paid back from a lump sum from the pension when I was 55 or over. Anyway, I got the money as a loan without any regular repayments. Two years later the Pensions service appointed a trustee to look after the scheme and they said that it was not a recognised scheme and that I would have to pay the money back. The matter has gone all the way to the High Court who have said that the scheme run by the company does not qualify as a scheme that would allow what I was told even though at the time the company selling me the service said that they had HMRC approval. Yesterday, I received a demand from HMRC demanding £12351. I am shocked at this as I have not got any money to pay it, am unemployed and have no assets other than my computer and clothes. I live with my mother in her rented property. I have looked at the HMRC website and it appears that they are treating the loan as a Pension Liberation and hence the amount they are demanding is 55% of the money I was loaned. On checking my papers, I have noted that the money came from a different pension scheme to the one that I was placed in by the company.

Can anyone help?




Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.



I am so sorry to hear of the position you find yourself in, but other than pursuing the company that undertook this release of the pension for you, to take responsibility for their blatant mismanagement of both the tax legislation and pension release (and I suspect it might be that they probably are no longer trading) then I am afraid there is no more recourse you have on this matter.


But I would contact HMRC and advise them of your financial situation, and ask them if they would consider a payment plan, as the pursuit of tax on this money (which was paid incorrectly) is HMRCs' right to take forward, to charge tax on any amount you have been paid.




I am sorry the advise if not more favourable, or provides any comfortable solution, but I am sure you would rather be given the honest position rather than false hope. However one final thought - did this company offering you this pension release, take on the pension?


Or does the pension still remain with the original pension providers? If the pension remains with the original providers, have they any instructions to "repay" any element of the whole pot to this company who offered you the release scheme? Im just thinking that if your pension remains with the original provider, and is still in tact, and has no request to release the funds to anyone other than you (which would be 25% at age 55 and the reminder as an annual pension for life - or review at the full pension age, as further lump sum/annual pension) then it may well be that your only position is the tax.


But as HMRC are going to charge you tax on the amount - as it should not have been released, and it was a loan on the expectation of what the release company projected WOULD be available for you to repay so not an actual pension release, it would be worth establishing the actual pension position at this stage with whomever holds the pension.



Thanks Sam

Customer: replied 4 years ago.

Hi Sam,


Thanks for your answer.


The pension was transferred to the new company from my original provider in full with my instructions.


Just one other point, if I cannot come to an arrangement with HMRC and have no assets but just other liabilities (£35k to various creditors is it feasible that they may seek to bankrupt me?

Hi Zahid

Thanks for your response and for clarification of the pension position, it would still be worth establishing the pension pot position.

Yes HMRC could seek to bankrupt you - or you could take this action yourself, but I urge you to seek advise before you consider this course of action,

Or you could seek an arrangement with local debt organisations to see if a voluntary arrangement can be put in place for you to clear all the debts, but again do seek advise.



Customer: replied 4 years ago.

Hi Sam,


I will be contacting the pension company to check the size of the pension pot tomorrow. How would this help me, that is, knowing the size of the pot?



HI Zahid

Thanks for your response
Well for one - has the money actually been paid out of the pot - because if not, then the tax owed to HMRC would be the end of it, and your pension pot is still in tact.
If, the amount has been paid back from the pension pot, then just establish is HMRC are charging you for the monies received as a loan (so liable to income tax) or whether they are charging you for release of money from the pension - that should have been taxed.

And finally knowing what you have left - and when it is actually due for some release, might help your financial position out ((although you do not indicate when you are due to turn 55)


Customer: replied 4 years ago.

What actually happened was that the company matched my loan with that of another so that my pension scheme was the Lancaster Scheme and the money came from someone that I was matched with whose money was in the Portman Scheme. The loan came from a company called Minerva. So I think that the money was taken out to give to another person also seeking to get money out of their pension. Does this make a difference? I will turn 55 in 9 years' time.



Hi Zahid

Thanks for your response

I am afraid I do not understand the intricate elements of how these schemes (whether approved or unapproved) work, just how HMRC would treat the position according to what has taken place.

This is why you need to establish the final position with your pension - and what happens now - whether you still owe anything, and whether this will be pursued for - and what HMRC are charging you for its either
1) The loan - in which case this has been treated as income and that's why the tax arises, but if they are treating it as pension released, on which tax should have been paid, then your pension at this stage, one would assume, is still in tact, based on what you say, and that being the case , do Minerva (the loan company) have any legal right to take some of you pension
2) If it was pension you had, and that has been released - and that's what HMRC are charging you on, but in fact it was just a loan, then you need to go back to HMRC are ask them to re-review the position and any tax due.

The fact you have 9 years until you get to age 55, probably will not assist at all - but it was worth establishing.

All I am suggesting is that you establish what HMRC are charging you, and on what actual amount (and source) that charge arises and how this whole business has or will affect your actual pension pot.


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