John Mander Pension Trustees Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 28 October 2011 |
| Neutral Citation | [2011] UKFTT 686 (TC) |
| Date | 28 October 2011 |
| Court | First Tier Tribunal (Tax Chamber) |
[2011] UKFTT 686 (TC)
Mrs B Mosedale (Tribunal Judge) (Chairman), Mr N Collard (Tribunal Member)
Mr L Sykes, Counsel, instructed by Ansons, solicitors, for the Appellant
Mr A Nawbatt, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
Income tax - charge on retirement benefits scheme administrator under Income and Corporation Taxes Act 1988 section 591Cs. 591C ICTA 88 on cessation of approval of scheme - whether notice validly given - whether assessments valid - whether raised in respect of correct year of assessment - whether raised in name of correct person - whether out of time
1.HMRC issued an assessment for 475,200 on 27 July 2000 on the Louvre Trustees Limited as trustee of the John Mander Limited Directors Pension Scheme ("the Scheme"). The Appellant is the current trustee of the Scheme and challenges the validity of the assessment. A second assessment in the same amount was raised on 22 January 2007 on the Appellant. That is also under appeal.
2.This appeal is designated as a lead appeal under Rule 18. The Direction issued by Judge Berner on 1 February 2011 was that:
For the purposes of Rule 18 of the Tribunal Procedure (First-tier) Tribunal (Tax Chamber) Rules 2009 the following are the common or related issues of fact or law in the appeals in respect of which this is the lead appeal:
1.Whether the relevant year of assessment of the charge arising under Income and Corporation Taxes Act 1988 section 591Csection 591C of the Income and Corporation Taxes Act 1988 is the year ending 5 April 2001; and
2(i)Whether the tax charged under s. 591C ICTA 1988 on the administrator of a scheme, and treated as charged on every relevant person under Income and Corporation Taxes Act 1988 section 658As. 658A ICTA 1988, can be recovered in full from any single relevant person on the basis that the assessment of only a single relevant person in the name of the administrator of the scheme establishes joint and several liability of all relevant persons (subject to s. 658(1)(b)), or whether recovery of the tax from a relevant person requires an assessment of that specific relevant person,
(ii)If the liability is joint and several, whether it extends to relevant persons not in existence at the time of the assessments.
3.The Appellant made further submissions on 19 July 2011 after the end of the hearing. The submissions were on two points: section 606 and interest. Although HMRC disputes this, the Appellant justifies the later submissions on the grounds that they were matters raised at the hearing by HMRC which were not presaged in its skeleton argument. We do not need to resolve this dispute as HMRC, although stating it was inappropriate for further submission to be made, did in fact reply to them, so we accepted both the submissions and HMRC's reply.
4.The Appellant responded to HMRC's reply on 25 July with a brief reply and HMRC again said that they did not think further submissions appropriate and objected to their admission. The Appellant then formally applied for them to be considered and HMRC withdraw their objection on the grounds the submissions added nothing so objecting to their consideration would waste time and costs. So we considered the submissions of 25 July as well.
5.We note in passing that there must be finality in litigation and unless a party applies for and is given permission at the hearing to make later submissions, submissions after the hearing should normally only be made in exceptional circumstances.
6.There was a statement of agreed facts between the parties. There were also two witness statements by Mr John Mander. HMRC did not choose to cross-examine Mr Mander and his statements were therefore unchallenged and accepted by this Tribunal. However, virtually all of both statements were concerned with Mr Mander's personal history, current financial position, what had happened to the funds in Vesuvius Scheme, and the authorship of his witness statement in the judicial review proceedings referred to below. None of these matters are relevant to this appeal and we do not refer them again apart from (briefly) Mr Mander's motivation in transferring the funds to the Vesuvius Scheme in paragraph 16 below.
7.We find the relevant facts were as follows:
8.The Scheme was created by a trust deed in 1987 and approved as a retirement benefit scheme under Income and Corporation Taxes Act 1988 part XIV chapter 1Chapter 1 of Part XIV Income and Corporation Taxes Act 1988 ("ICTA") by the Inland Revenue. The beneficiaries of it were Mr and Mrs J Mander.
9.The original trustees were Mr & Mrs J Mander and Mr A Jackson. Mr Jackson resigned on 9 September 1994 and on the same day DJT Trustees Ltd was appointed in his place. On 5 November 1996 Mr & Mrs J Mander resigned as trustees and the Louvre Trust Company Limited (a Guernsey registered company) was appointed in their place.
10.On 18 March 1997 DJT Trustees Ltd resigned as trustee. This left the Louvre Trust Company Limited as the only trustee. On 20 June 1997 TM Trustees Ltd was appointed and Mrs Mander re-appointed as trustees and the Louvre Trust Company resigned.
11.On 26 February 1998 Louvre Trustees Limited (another Guernsey registered company) was appointed as trustee and Mrs Mander resigned. Louvre Trustees Limited resigned as trustee on 1 November 2001, leaving TM Trustees Ltd as the only trustee. On 12 March 2002 the Appellant was appointed as trustee. It had been incorporated as a company only a few days earlier, on 28 February 2002. On 22 March 2007 TM Trustees Ltd resigned as trustee so that at the date of the hearing the only trustee was the Appellant.
12.On the same day that Mr & Mrs Mander resigned as trustees, 5 November 1996, the funds of the pension scheme were transferred to the Vesuvius Shipping Limited Pension Scheme ("the Vesuvius Scheme"). The Vesuvius Scheme had originally been a pension scheme approved by the Inland Revenue, but it became unapproved by reason of a change to the scheme rules which permitted it to make loans on terms not permitted for approved schemes.
13.On 19 April 2000 the Inland Revenue wrote two letters, one to the Louvre Trust Company Limited and one to TM Trustees Limited notifying them that the Inland Revenue were withdrawing approval from the Scheme. The letters said:
The Board has therefore decided to give notice that approval has been withdrawn with effect from 5 November 1996.
14.On 27 July 2000 an assessment was made on the Louvre Trustees Limited in the sum of 475,200 being 40% of the estimated value of the Scheme funds as at 4 November 1996. The year of assessment was stated as 2000/2001. The assessment was appealed on 31 July 2000.
15.A further assessment was raised by HMRC on 22 January 2007 against the then two trustees of the Scheme, the Appellant and TM Trustees Ltd. It was appealed on 13 February 2007.
16.The motivation of the appellant and HMRC is irrelevant to this appeal. Mr Mander in his witness statement gave evidence that the scheme assets were transferred in 1996 to the Vesuvius Scheme because he did not want the funds in so restrictive a regime which necessitated the purchase of an annuity. He wanted the trustees to have freedom to do other things with the money. HMRC describe this as tax avoidance. The Appellant, on the other hand, considers Mr Mander should not be criticised as the tax charge on the loss of approval of the retirement benefits scheme was rightly in its view described as "Draconian" by the Special Commissioner in Thorpe v R & C Commrs SCD(2008) Sp C 683, because it is a charge at 40% on the funds' value despite payments out of the fund being subject to tax. In passing, we note that we do not agree with the Appellant's view: the purpose of the 40% charge on assets leaving an approved scheme is to re-coup the tax advantages the funds enjoyed while in an approved scheme. If a scheme member does not wish to abide by the rules, and in particular accept the limitations on what can be done with the funds in an approved scheme, then he is not entitled to the tax benefits, and it seems quite reasonable for the Government to seek to recoup them. As Sir Edward Evans-Lombe said in Thorpe, at paragraph 45, there is no element of double taxation in this charge to tax.
17.However, none of this is relevant to this case. Quite rightly no one suggested that this Tribunal had any judicial review function and we did not conduct any review of HMRC's decision to withdraw approval from the Scheme. A judicial review having failed in 2001, HMRC's power to withdraw approval and to raise an assessment could not be challenged: the case is about whether approval was validly withdrawn, whether the two assessments were validly made, at the right time, on the right person and in respect of the right year.
18.The Appellant applied for leave on 8 February 2011 to add a new ground of appeal. HMRC opposed the application. The new ground of appeal was that the withdrawal of approval of the Scheme was ineffective. This was because at the time of the withdrawal of approval on 19 June 2000 the administrator of the scheme was Louvre Trustees Limited and TM Trustees Limited. Two notices of withdrawal, however, were sent, one to the Louvre Trust Company and one to TM Trustees Ltd.
19.HMRC's grounds of opposition to the application were:
The validity of the notice of withdrawal was not appealable under Taxes Management Act 1970 section 31section 31 TMA 1970. The proper course of action to challenge the notice is by judicial review but not only had this Tribunal no jurisdiction to hear a judicial review (see CID Pension Fund Administrators v Glover SCD(2001) Sp C 292), the appellant had already sought leave and been refused permission to apply for judicial review. Therefore, allowing the amendment would give the Appellant a second...
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