Thorpe v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | SIR EDWARD EVANS-LOMBE,Sir Edward Evans-Lombe |
| Judgment Date | 26 March 2009 |
| Neutral Citation | [2009] EWHC 611 (Ch) |
| Docket Number | Case No: CH/2008/APP/0459 |
| Court | Chancery Division |
| Date | 26 March 2009 |
[2009] EWHC 611 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Sir Edward Evans-Lombe
(Sitting as a Judge of the High Court)
Case No: CH/2008/APP/0459
Mr John Macdonald QC (instructed by Mr H. Thorpe) for the Appellant
Miss Ingrid Simler QC (instructed by the Solicitor for HMRC) for the Respondents
Hearing date: 20/11/08
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Sir Edward Evans-Lombe:
In this case the Appellant appealed against the following notices of assessment to tax on him by HM Revenue and Customs (“the Revenue”):—
i) Dated 23 rd August 2002 under s 591C of the Income and Corporation Taxes Act 1988 (“ ICTA”) for the year 1998/9
ii) Dated 28 th November 2002 under s 600 ICTA for the year 1998/9
iii) Dated 22 nd September 2004 under s 591C ICTA for the year 2004/5
iv) Dated 5 th October 2004 under s 596A ICTA for the years 1998/9 to 2000/1 inclusive.
These appeals were dismissed by the Special Commissioner, Mr Julian Ghosh QC, on 19 th May 2008. The Appellant appeals to this court against that decision (“the Decision”). In this judgment I will use the terminology and abbreviations used by the Special Commissioner.
The issues in this appeal arise from the actions of the Appellant in withdrawing the whole of the fund held by the trustees of an approved pension scheme (“the Scheme”), of which at the time he was the only surviving member, justifying that withdrawal on the ground that, as the only beneficiary of the trust which established the Scheme, he was entitled to require the trustees to deliver the fund to him under the rule in Saunders v Vautier (1841) Cr. & Ph 240. It was his contention, contrary to the Revenue's view, that, in consequence, he should suffer no adverse tax consequences as a result of what he had done.
The background facts
There is no dispute as to the background facts in this appeal. The Special Commissioner proceeded on the basis of a notice of agreed facts. He set out the material facts between paragraphs 5 and 25 inclusive of his decision. So that this judgment will be complete in itself, I will set out those paragraphs using the numbering used in the Decision as follows:
“5. The Scheme was established on 15 March 1979 by a declaration of trust executed by Juriscommerce Securities Limited ('the Company'). The Manufacturers Life Insurance Company Limited ('ManuLife') was the original administrator of the Scheme. The Appellant and his late wife, Kathleen Mary Thorpe ('Mrs Thorpe'), were the only employees of the Company and the only members of the Scheme. The Appellant was also the sole director of the Company until his retirement in 1999.
6. Mrs Thorpe died on 7 July 1991. The moneys due to Mrs Thorpe under the Scheme were duly paid to her personal representatives.
7. By a supplemental trust deed dated 1 January 1994, the Scheme became a small self-administered scheme and adopted new rules. The Appellant's daughter, Alison Thorpe, and Hartley Pension Management Services Limited ('the Pensioneer Trustee') were appointed as additional trustees to act with the Appellant (who was described in the supplemental trust deed as 'the continuing Trustee').
8. By clause 2 of the supplemental trust deed, it was agreed and declared that the Scheme would be operated as an exempt approved scheme for the purposes of the Finance Act 1970 (' FA 1970') and that the maximum benefits permitted by the legislation would be paid to each member of the Scheme upon the member's retirement from the Company. By clause 6(g), it was confirmed for the avoidance of doubt that the trustees had no duty, discretion or power to make any payment to any member which exceeded the maximum benefits authorised by the legislation.
9. Clause 5 of the supplemental trust deed concerned the appointment and removal of trustees. The power of appointment and removal was vested in the Company. By clause 5(b), the Company was obliged to give not less than four weeks notice to any trustee that it required to remove from that office. Clause 5(d) provided that in the event of the death, resignation or removal of any trustee, the continuing trustees should not take any action to execute the trusts of the Scheme until the Company had exercised its power of appointment of a new trustee. By a further deed dated 21 August 1998, the Company was discharged from all obligations in connexion with the trust and the power of appointing and removing trustees was assigned to the Appellant.
10. On 3 June 1994, the Board of Inland Revenue accepted that the Scheme was an exempt approved scheme for the purposes of section 592 ICTA. The approval related back to 10 April 1979. The Pensioneer Trustee was notified accordingly by a letter from the Inland Revenue Pension Schemes Office dated 10 June 1994.
11. On 22 July 1994, the Company assigned to the trustees all its title in the ManuLife policy set up under the original scheme. On 4 April 1995, the trustees opened an account with the Chesham Building Society, into which they deposited on or about 19 September 1995 all the funds of the Scheme following the encashment of the ManuLife policy.
12. By a letter dated 6 November 1998 and addressed to Hartley Pensions Administration Limited (a subsidiary of the Pensioneer Trustee), the Appellant stated that he had reached:
… the view that I should exercise my sole beneficial interest in the fund pursuant to the role [sic] in Saunders v. Vautier.
The letter enclosed a notice dated 5 November 1998 and addressed to the trustees of the Scheme (including the Pensioneer Trustee) in the following terms:
TAKE NOTICE that pursuant to the Trust Deed dated 15th March 1979 and the Supplemental Trust Deed dated the 1st day of January1994 the said HARRY THORPE is absolutely entitled to the whole beneficial interest declared by the said Trust Deeds AND FURTHER TAKE NOTICE that by virtue of the said Trust Deed and the Rule of Law known as the Rule in Saunders v. Vautier the said HARRY THORPE HEREBY DIRECTS you the said Trustees to transfer to him absolutely all property held by you as said Trustees aforesaid and in particular the Deposit of money held in Account Number 33.00.00428.05 and held in your names at Chesham Building Society, 12 Market Square, Chesham in the County of Buckingham and WE HEREBY inform the Society accordingly. THIS NOTICE shall take effect on the 2nd day of December I998
13. On 12 November 1998, the Pensioneer Trustee wrote to the Appellant enclosing a copy of the undertaking that it had given to the Inland Revenue Pension Schemes Office. The letter informed the Appellant that the Pensioneer Trustee was unable to agree to the monies then held at the Chesham Building Society being paid to the Appellant as that would constitute a termination of the Scheme other than in accordance with the approved winding-up provisions.
14. By a notice dated 16 November 1998 and addressed to the directors of the Pensioneer Trustee, the Appellant gave notice:
… that pursuant to the powers vested in my by Clause 5 (9) [sic] of the Supplemental Trust Deed of 1st January 1994 Clause (1) of the Deed of Discharge of 21st August 1998, and every other power me enabling I TERMINATE the Office held by your Company of Trustee howsoever called.
The Appellant also sent a covering letter of the same date explaining his actions.
15. As at 1 December 1998, the sum of £255,768.97 was held in the account in question at the Chesham Building Society.
16. The Appellant withdrew the sum of £200,000 on 2 December 1998, the sum of £12,000 on 30 December 1999 and the remaining balance of £60,499.19 on 21 July 2000.
17. On 28 January 2000, the Appellant made a return for the year 1998/1999, in which he declared his income, save for the payment that the Respondents contend ought to have been included because it was made out of the Scheme on 2 December 1998.
18. The Inland Revenue Pension Schemes Office wrote to the Appellant on 8 February 2000 informing him that a failure to provide an actuarial valuation report would result in approval of the Scheme being withdrawn. The Appellant replied by a letter dated 9 March 2000, in which he informed the Pension Schemes Office that he had become the sole beneficiary of the trusts of the Scheme on 7 July 1991 and that he had wound up the trust pursuant to the rule in Saunders v. Vautier.
19. By a letter dated 5 June 2000, the Pension Schemes Office informed the Appellant that it was not satisfied that the Pensioneer Trustee had been correctly removed. It also stated that the Appellant was unable to wind up the Scheme under the rule in Saunders v. Vautier.
20. The Company was dissolved on or about 19 September 2000.
21. On 26 July 2001, the Appellant made a return for the year 1999/2000 in which he declared his income, save for the payment of £12,000 that the Respondents contend ought to have been included because it was made out of the Scheme on 30 December 1999. Similarly, on or before 31 January 2002, the Appellant made a return for the year 2000/2001, in which he declared his income, save for the payment of £60,499.19 that the Respondents contend ought to have been included because it was made out of the Scheme on 21 July 2000.
22. On 22 August 2002, the Inland Revenue wrote to the Appellant in his capacity as administrator of the Scheme, informing him that an assessment would be issued under section 591C ICTA on the basis that approval of the Scheme had ceased automatically under section 591B(2) ICTA as there had been an alteration to the Scheme that had not been approved by the Inland Revenue. The following...
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