Key Facts
- •Six registered occupational pension schemes (Ark Schemes) operated a Pensions Reciprocation Plan (PRP).
- •The PRP involved reciprocal loans between members of different Ark Schemes (MPVA loans).
- •Dalriada Trustees Limited was appointed as independent trustee of the Ark Schemes.
- •HMRC assessed Dalriada and Ark Scheme members to tax under Part 4 of the Finance Act 2004.
- •Appeals were lodged against unauthorised payments charges, surcharges, scheme sanction charges, and refusal to discharge surcharges.
- •Ms Oades received MPVA loans and did not repay them.
- •Mr Donaghy-Sutton did not receive MPVA loans but was assessed due to the scheme's structure.
Legal Principles
Unauthorised member payments are payments not specified in section 164 of the FA 2004.
Finance Act 2004, Section 160
Using scheme assets to provide a benefit (other than a payment) to a member is treated as an unauthorised payment.
Finance Act 2004, Section 173
An unauthorised payments charge (40%) is imposed on members receiving unauthorised payments.
Finance Act 2004, Section 208
An unauthorised payments surcharge (15%) is imposed on members receiving surchargeable unauthorised payments.
Finance Act 2004, Section 209
A scheme sanction charge (40%) is imposed on the scheme administrator for scheme chargeable payments.
Finance Act 2004, Section 239
Applications to discharge liabilities can be made under Section 268 of the FA 2004.
Finance Act 2004, Section 268
A payment made in breach of trust still amounts to a 'payment' for tax purposes.
Clark v The Commissioners for Her Majesty’s Revenue and Customs [2020] EWCA Civ 204
Outcomes
Appeals against scheme sanction charges dismissed.
Scheme administrator's belief that MPVA loans were not scheme chargeable payments was deemed unreasonable.
Ms Oades's appeal against refusal to discharge unauthorised payments surcharge dismissed.
Ms Oades did not make a valid application to discharge the surcharge within the time limit.
Each MPVA loan made by a scheme was an unauthorised payment in respect of the matched member(s) of that scheme.
Member-to-member matching was the intended operating principle of the PRP.
The receipt of an MPVA loan by a member is treated as a deemed unauthorised payment under Sections 160(2)(b) and 173.
The benefit of the loan, even if indirectly received, constitutes a deemed unauthorised payment.