The new pensions regime introduced on 6 April 2006 (A-Day) was designed to simplify pensions. However, the rules for pension funds investing in unquoted shares remain complex.
Putting private company shares into a SIPP might sound like an attractive idea, but there are significant tax and other potential traps for the unwary.
Even if the traps can be avoided, trustees will need to ask themselves whether such shares are really a suitable investment for a pension scheme.
How the rules work
If a pension scheme holds shares in an unquoted company that buys residential property or moveable assets costing more than £6,000, the pension scheme may be deemed to have purchased those assets direct. In these circumstances a scheme member faces a tax charge of 40% or 55%. The pension scheme also faces a tax charge, typically of 15%, and a further charge of 40% will be levied on any income and/or gains subsequently arising on that asset. This means that if the company buys plant and machinery,
