Don't Always Trust the Guidance
Based on HMRC’s Pensions Tax Manual, members of Self Invested Personal Pensions may have thought that they might bring about their pension by transferring shares or other assets towards the SIPP and get tax relief around the worth of the contribution. In HMRC v Sippchoice the taxpayer had done just that but his claim for tax relief was denied by HMRC. His appeal against that call succeeded prior to the First Tier Tribunal but has been overturned by the Upper Tribunal.
Section 188 of the Finance Act 2004 offers tax relief on relievable contributions paid with a member of an authorized pension scheme. The main issue in the Sippchoice case was the meaning of “paid” within this context. Top of the Tribunal accepted that taken in isolation “paid” is broad enough to cover non-monetary payments but context is essential ). Section 195 from the Finance Act 2004 provides for the change in eligible shares to be treated as the payment of a contribution. The provisions of section 195 could have been rendered redundant if “paid” had the wider meaning contended through the taxpayer.
The Upper Tribunal also considered whether the change in non-cash assets to satisfy a money debt could amount to contributions paid within section 188. The Pensions Tax Manual suggested it was possible for an associate to accept pay a fiscal contribution to his pension scheme and then to satisfy that obligation by transferring a good thing towards the scheme . The Upper Tribunal held that the existence of an agreement to pay for a monetary contribution made no difference to the effect of section 188; the contribution had to be paid in money so the transfer of shares would not attract tax relief.
Perhaps notably it wasn't argued by Sippchoice it had had trusted the appropriate passage within the Pensions Tax Manual.
The Sippchoice case isn’t the very first time the courts have been prepared to depart from guidance in relation to a pensions dispute. The Pensions Regulator issues codes of practice which supplement what the law states and contain detail about how trustees yet others can comply with their legal obligations. The codes aren’t statements of law but the courts should take into consideration any relevant provisions from the codes when deciding whether someone has complied with their legal obligations.
The Pensions Regulator ensures compliance with pensions law so diligent trustees and responsible employers will pay close attention to what it says. It doesn’t make the law, however, and it is the task from the courts to decide exactly what the law is. The courts won’t necessarily be swayed by TPR’s views.
The following passage from PNPF Trust Co Ltd v Taylor and Others can provide some comfort to anyone finding themselves in disagreement with TPR in regards to a point of law:
Manuals and guidance can be very helpful but it's risky to rely on them completely. HMRC’s primary duty to gather tax may imply that it's not bound by advice or guidance it has given.
