Adviser jailed for four years over pension tax fiddle
Tuesday 27 April 2004
A financial adviser who helped clients avoid paying tax on their pension income, losing the Inland Revenue more than £5.5m, was sentenced to four years in jail at Blackfriars Crown Court in London yesterday.
Anil Kumar, 49, from Letchworth in Hertfordshire, set up the illegal "Stax scheme" in 1997, taking almost 100 clients on board before the Revenue caught up with him four years ago.
The scheme offered clients the chance to unlock funds in their pension pots, which they would otherwise not be able to access without buying an annuity in retirement.
Under the plan, funds were transferred to a dormant company, from which Kumar gave clients access to their money in the form of a loan, which they would not have to pay back. By withdrawing the money in this way, it remained exempt from tax.
However, the law states that only 25 per cent of a pension fund can be withdrawn in tax-free cash, and only once the investor is more than 50 years old. The remainder is then taxed at normal income tax levels once it is paid out of the fund.
The Inland Revenue said Kumar's sentence may have been harsher had he not been in ill health. He is suffering from a kidney disorder and cirrhosis of the liver.
Two other defendants originally stood trial alongside Kumar but were acquitted. A fourth man believed to be involved with the scheme, Peter Rumball, fled the country in 2001 and is thought to be living in the Philippines. The Inland Revenue said the UK does not have the necessary diplomatic agreement with the Philippines which would allow it to extradite Mr Rumball.
Kumar and his associates are believed to have made more than £2m in fees from the scam.
Judge Byers, in passing sentence, said: "It is often said that this type of crime is a victimless crime but those who indulge in this type of dishonest activity steal from every citizen in the UK. Those who were persuaded to use the scheme paid fees and many now face liability to income tax on the sums transferred."
Peter James, an Inland Revenue investigator, said: "The Inland Revenue will continue to seek to prosecute those who promote dishonest schemes for the evasion of tax."
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