Sippchoice Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 June 2016 |
| Neutral Citation | [2016] UKFTT 464 (TC) |
| Date | 30 June 2016 |
| Court | First Tier Tribunal (Tax Chamber) |
Judge John Walters QC, Mr Charles Baker FCA
Rebecca Murray, Counsel, appeared for the appellant
Laura Poots, Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Income tax – Pension scheme sanction charges – Scheme administrator appealing under Finance Act 2004 (FA 2004), s. 269 against HMRC's decision to refuse the discharge of its liability to scheme sanction charges – The question being whether the scheme administrator reasonably believed that no unauthorised payment was being made and whether it would not be just and reasonable for the scheme administrator to be liable to the scheme sanction charges – FA 2004, s. 268(7) – Held that on the evidence the appellant reasonably believed that no unauthorised payment was being made and that it would not be just and reasonable for it to be liable to the scheme sanction charges – Appeal allowed and application for discharge granted.
The First-tier Tribunal has held that a pension scheme administrator that had taken steps to ensure that a company in which it invested was not operating a pension liberation scheme and had been deliberately misled was not liable to the scheme sanction charge.
Sippchoice Ltd was the scheme administrator of the Sippchoice Bespoke SIPP (SB SIPP). Sippchoice was approached by an individual previously unknown to them, Mr Ross-Jones, who enquired whether Sippchoice would allow pensions to be invested in unquoted companies as he was aware of a number of individuals who wished to invest in this way via a SIPP. Sippchoice confirmed that this would be possible subject to due diligence and identity checks. Mr Ross Jones duly incorporated Imperium Enterprises Ltd (Imperium). Sippchoice established that Imperium was going to make property investments and short-term commercial loans where funds were available between property investments. They were verbally assured that no loans would be made to SIPP members or other individuals, and were reassured by verified identity checks and the fact that one of Imperium's directors was a qualified solicitor. However, unknown to Sippchoice, Imperium in fact lent money to a company (BOH) that used the funds to subscribe for shares in a subsidiary (SKW) that made loans to SIPP members (unauthorised member payments under FA 2004, s. 160), and in fact Imperium had advised investors that they would be able to unlock their pensions by investing in SR SIPP. HMRC sought to impose a scheme sanction charge under FA 2004, s. 239, and Sippchoice appealed, on the grounds that they had reasonably believed there were no unauthorised payments and it would not be just and reasonable for the scheme sanction payment to be imposed (s. 268(7)).
Sippchoice had on several occasions been concerned whether Imperium was operating a pension liberation scheme to enable members to access their pension funds before the minimum age of 55. On one such occasion they were reassured by Imperium that BOH did not lend to individuals and that another debtor provided only secured finance to individuals, and on another occasion (recorded in meeting notes) they were told that no loan facilities were offered by Imperium or BOH to investors in conjunction with their investments although loans may be being made by an unconnected third party. Sippchoice were unaware of the existence of SKW. Finally, on receiving an email from an investor stating that he had transferred his pension fund to SB SIPP in order to secure a loan from SKW, Sippchoice immediately ceased accepting new business from Imperium and informed HMRC about the loan.
The FTT, following Mobilx Ltd (in administration) v R & C Commrs VAT[2010] BVC 638 considered whether Sippchoice realistically had the means at its disposal to learn of the connection between investments in Imperium and loans by SKW and concluded that it did not. It had made suitable enquiries and been deliberately misinformed. It was also reasonable that Sippchoice should have been satisfied that the investments in Imperium were genuine commercial investments in a company primarily concerned with building up a property business and therefore Sippchoice had satisfied s. 268(7)(a) – it reasonably believed that there was no unauthorised payment being made. In the FTT's view there was nothing exceptional in the case that would make it just and reasonable for scheme sanction charges to be imposed (s. 268(7)(b)) and therefore the appeal was allowed.
It was agreed between the parties that the appeal against the scheme sanction charge should be considered on the basis that unauthorised member payments had been made. However, this question is to be the subject of separate appeals by members of the SB SIPP.
[1] This is an appeal, under section 269 Finance Act 2004 (FA 2004), by Sippchoice Limited (Sippchoice) against the decision of the Respondents (HMRC) to refuse Sippchoice's application (made under section 268 FA 2004) for the discharge of its (Sippchoice's) liability to scheme sanction charges. The amounts originally assessed in respect of scheme sanction charges were reduced, pursuant to a decision contained in a letter from the Respondents (HMRC) to Sippchoice dated 13 March 2014, to £205,307.80 in respect of the tax year 2010/2011, and £168,545.00 in respect of the tax year 2011/2012.
[2] Section 268(5) FA 2004 entitles a scheme administrator (a person responsible for the discharge of functions imposed on it in relation to a pensions scheme by FA 2004 – see the definition in section 270 FA 2004) to apply to HMRC for the discharge of its liability to a scheme sanction charge on (so far as is relevant to this appeal) the ground mentioned in section 268(7) FA 2004.
[3] It is common ground that Sippchoice is a scheme administrator for these purposes and the ground mentioned in section 268(7) FA 2004 is that:
a) the scheme administrator reasonably believed that the unauthorised payment was not a scheme chargeable payment, and
b) in all the circumstances of the case, it would not be just and reasonable for the scheme administrator to be liable to the scheme sanction charge in respect of the unauthorised payment.
[4] In short, the reason for HMRC's decision was that with effect from 22 December 2010 Sippchoice did not reasonably believe that the unauthorised payments in question were not scheme chargeable payments (see: below) because it failed to take adequate action, having received clear indication that a scheme member was waiting to receive an unauthorised payment.
[5] The Tribunal's function in this appeal is to consider whether Sippchoice's liability to the scheme sanction charges in issue ought to have been discharged (see: section 269(6) FA 2004). In other words, we must consider whether, on the evidence before us, the ground mentioned in section 268(7) FA 2004 has been made out by Sippchoice.
[6] In order to make the issue in this appeal (which we have summarised above) comprehensible to the general reader, we provide further background as follows.
[7] It is HMRC's case that a self-invested personal pension scheme (a SIPP), known as the Sippchoice Bespoke SIPP (the SB SIPP), which is operated by Sippchoice in its capacity as scheme administrator, held investments which have been used to enable members of the SB SIPP to access their pension funds (in the form of obtaining loans) before the age (55 years) at which pension scheme members are permitted to obtain benefit from their pensions, and that attempts have been made to access pension funds in this way in a manner aimed at avoiding a charge to tax. Schemes of this type are known as Pension Liberation Schemes. We say at once that HMRC accept that Sippchoice did not know that a Pension Liberation Scheme was being operated. Put very broadly, HMRC's case is that Sippchoice did not take adequate steps to ensure that the SB SIPP was not being abused in this way.
[8] At the heart of HMRC's case is their assertion that members of the SB SIPP have accessed their pension funds by receiving payments (made in the form of loans) which were unauthorised member payments for the purposes of Part 4 of the FA 2004 (which deals with pension schemes) – unauthorised member payments are a type of unauthorised payments. The definition of unauthorised member payment is contained in section 160(2) FA 2004 and the relevant part of that definition is that an unauthorised member payment is a payment made by a registered pension scheme to or in respect of a person who is or has been a member of the pension scheme which is not authorised by section 164 [FA 2004] (see: section 160(2)(a) FA 2004). Section 164 FA 2004 deals, unsurprisingly, with authorised member payments.
[9] Where an unauthorised member payment is made, a charge to income tax, known as the unauthorised payments charge arises under section 208 FA 2004. This charge (which is at 40%) is normally made on the recipient, not on the scheme administrator. HMRC have, we are told, assessed the majority of the members of the SB SIPP for the unauthorised payments charge, and this has given rise to a number of appeals to this Tribunal which had not yet been heard (at the time of the hearing of this appeal). The issue in those appeals will be whether or not any payments received out of the SB SIPP were unauthorised member payments, and, if so, whether they attracted the unauthorised payments charge.
[10] We were asked by both sides to assume (in HMRC's favour) that the payments in issue which were made were indeed unauthorised payments. This is obviously without prejudice to any appeals by any members of the SB SIPP where that point is in issue.
[11] If we had decided (which we have not – see: below) that Sippchoice's liability to the scheme sanction charges in issue ought not to be discharged, our decision would have been preliminary in nature, because it is fundamental to any liability of Sippchoice to scheme...
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