In Specie Contributions
HMRC have recently set out their requirements in respect of in-specie contributions.These requirements mean a number of steps need to be followed. This is an area being kept under close scrutiny by the Revenue.
As we are required by HMRC to create a “debt” on the existing asset holder, we require two letters to be provided by the member or employer making the contribution. The value of the contribution on letter 1 should be the quarter up valuation of the asset. Please see our glossary for the definition of a 'quarter up valuation'.
We also require you as the Financial Adviser to have two meetings with your client to discuss the making of the in specie contribution and we will require a letter from you confirming this before we can proceed with the purchase. We have a standard letter should you require one.
As with all contributions we will require our additional contributions form completing.
Transfer documentation will be required and this will be dependent on the actual asset being used for the in specie contribution, for example a stock transfer form for unitised investments and shares, details of a Solicitor who will be required to prepare a TR1 form, or purchase/sale agreement in respect of a property contribution.
Stamp duty may be payable by the scheme if the contribution is being made using Shares.
Please note if a property is being transferred, there should be no borrowings attached to it.
Once the documentation has been received, we will process the in specie contribution and arrange for the asset to be transferred to the scheme. We may need to issue a cheque in respect of stamp duty payable on shares for signature and return. We will also issue an acknowledgment letter to the member or employer that will need to be signed and returned to us in order to finalise the debt.
Once the in specie contribution has taken place, we will need to check that the value of the asset is the same as what was stated on Letter 1 from the member. If the value has gone down, then we are required by HMRC to obtain the balance from the member or employer who made the contribution. If the value has gone up, we are required to make a refund, or documentation has to be completed to make the excess a further contribution.
As a result of the changes made by HMRC, our fees for all in specie contributions are £800 regardless of the asset being transferred due to the increased level of work.
To recap, we require the following documents to receive an in specie contribution:
- Our two standard letters from the member or employer making the
contribution
- Letter from the Financial Adviser confirming two meetings have been held
- Additional contribution application form
- Transfer documentation relating to the asset being transferred, or details of
the solicitor acting for the property transfer.
Please find below letter for use when making inspecie contributions -
Letter from Financial Adviser confiming more than one meeting (56kb)
Letter from trustees to employer (56kb)
Letter from trustees to member (56kb)
Letter from employer to trustees (72kb)
Letter from member to trustees (72kb)