New legislation comes into force from April to reduce the amount they can claim back. But to help schemes meet this deadline, a law firm is prepared to lodge claims on behalf of tax specialist KPMG.
Smaller schemes will be hit hardest as the rules will require expensive and complex standards of accounting to claim back tax through tribunals, rather than the existing High Court route.
But KPMG’s tax office has calculated all schemes could be affected, with the average loss to schemes up to £16m (including compound interest) per £1bn of assets managed.
PW first alerted schemes to the problem last year (see PW 20/07/09), raising concerns over Manninen and Foreign Income Dividend (FID) claims, where schemes can claim back tax taken on dividends of direct investments; and stocklending claims, where schemes reclaim withholding tax paid on equities lent out.
Schemes have been deterred from going to court in the past for fear of not having sufficient accounting data, despite the currently lax requirements.
KPMG tax chief Chris Morgan insisted this attitude was a mistake, saying: “So many claims have now been quantified, we can estimate claims with minimal information for the years in which the schemes were affected.
“As long as you spend less on making the claim than you are owed from it, it is worth it. To date, 25 KPMG pension clients have filed withholding tax claims, with values ranging between £250,000 and several millions.
“Manninen claims for a scheme with £1bn worth of assets will typically be between £5.5m and £8m. FID claims are usually £0.5m. Both of these could double with [compound] interest.”
Schemes interested in claiming should contact McGrigors law firm, which is handling the claims on behalf of KPMG, to lodge a protective claim before March 31. Schemes then have four months to quantify that claim.
