NAPF warns Brown over tax credits

The National Association of Pension Funds expressed "deep concern" yesterday at the widely held belief that Gordon Brown, the Chancellor of the Exchequer, was planning to reduce or abolish the tax advantages enjoyed by pension funds.

Speaking at the association's annual conference in Harrogate, Ann Robinson, the NAPF's director general, warned the Government that an assault on the advance corporation tax (ACT) credit that institutions currently claim back from the Treasury would be "ill advised - a serious mistake."

The NAPF is concerned that, having promised not to raise individual income tax rates, the Government will be forced to attack the corporate sector to plug the gaps in the public finances. It is thought the Government might view the investing institutions as a more palatable target than the companies it strenuously wooed in the run-up to the election.

Currently pension funds and other tax-exempt investors receive dividends on which the company has already paid advance corporation tax at a rate of 20 per cent. The funds are able to claim this tax back from the government while the company offsets its advance payment against subsequent mainstream corporation tax bills, resulting in an overall reduction in the amount of tax collected by the government.

It is a system the NAPF defends because it argues tax is paid on the funds later when pensions are actually drawn by individual pensioners. According to Ms Robinson, "Imposing a tax on dividends to pension funds has the effect of imposing double taxation on individuals."

The cost to the government of returning tax to gross funds is estimated at up to pounds 4bn a year, making it an obvious target for a revenue-hungry government. Four years ago, Norman Lamont reduced the rate at which advanced corporation tax was paid (and refunded) from 25 per cent, raising around pounds 1bn.

The NAPF argues that abolishing or reducing the rebate might be self- defeating because it would mean profitable companies had to divert more of their retained profits into their pension funds to maintain their ability to pay promised pensions. This would lessen the apparent tax benefit to the government by reducing the amount of mainstream corporation tax it could raise from businesses.

Another side effect might be a reduction in the pension fund revenues of local authorities and other public sector employers.

Comment, page 23

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Mortgage Advisor - OTE £95,000

£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Day In a Page

Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high
How to find gold: The Californian badlands, digging out crevasses and sifting sludge

How to find gold

Steve Boggan finds himself in the Californian badlands, digging out crevasses and sifting sludge
Singing accents: From Herman's Hermits and David Bowie to Alesha Dixon

Not born in the USA

Lay off Alesha Dixon: songs sound better in US accents, even our national anthem
10 best balsamic vinegars

10 best balsamic vinegars

Drizzle it over salad, enjoy it with ciabatta, marinate vegetables, or use it to add depth to a sauce - this versatile staple is a cook's best friend
Wimbledon 2015: Brief glimpses of the old Venus but Williams sisters' epic wars belong to history

Brief glimpses of the old Venus but Williams sisters' epic wars belong to history

Serena dispatched her elder sister 6-4, 6-3 in eight minutes more than an hour
Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy