Lib Dems Try To Close Jet-to-Let Loophole - Huhne

12.00.00am BST (GMT +0100) Thu 23rd Jun 2005

Shadow chief secretary to the Treasury Chris Huhne MP

The Liberal Democrats today tabled an amendment to the new finance bill that would close the loophole by which "jet to let" properties together with wine and vintage car collections can be bought with people's pension funds, attracting maximum tax relief.

Shadow chief secretary to the Treasury Chris Huhne tabled the new clause along with the two other Liberal Democrat members of the standing committee on the finance bill, Susan Kramer and Stephen Williams.

Chris Huhne said that the pension rules that will take effect on 6 April 2006 allow people to get maximum tax relief at their top rate of tax on any assets held in a self-investment personal pension (SIPP) including overseas holiday homes, country homes that are let out, paintings and sculpture and personal collections of valuables.

The new provisions replace a controlled list of approved assets such as shares and bonds.

"The Treasury has completely underestimated the potential revenue losses from this change in the rules on assets. Many City advisers are now telling their clients that the new rules on SIPP are a fantastic way of buying assets with full up-front tax relief as you can invest up to 100 per cent of income with a limit of £215,000 a year" said Mr Huhne. "Any increase in value plus any income is entirely protected from the taxman".

Mr Huhne said: "In theory, if you use the asset yourself, you are liable to a tax on benefits in kind. But this provision is wide open to abuse, as it is hard to imagine officials from Her Majesty's Revenue and Customs visiting, say, Croatia to check on whether a holiday home is genuinely empty and unlet at a particular time of year, or is being used by the owners.

The clause that the Lib Dems have tabled to the new finance bill limits the ability of SIPPS to invest in directly-owned residential property and in assets such as wine or gold bullion that are not capable of producing an income return to the fund.