On appeal from: [2013] EWCA Civ 1683

The Supreme Court allowed the appeal by a majority of 3:2 regarding what tax year should the respondent have assessed the appellant’s tax.

The appellant gave notice withdrawing approval for tax purposes from a pension scheme, of which he was the sole trustee. The Revenue notified the administrator of the appellant pension scheme on 19 April 2000 that approval was withdrawn under the Income and Corporation Taxes Act 1988, s 591B(1), with effect from 5 November 1996. Under s 591C of the Act, once approval “ceases to have effect”, the scheme is liable to a 40% tax charge on an amount equal to the value of the scheme assets immediately before the date of the “cessation of approval” of the scheme. The Revenue said that the 40% tax charge fell to be assessed in the 2000/1 tax year when the withdrawal was notified. The appellant believed that it fell to be assessed in the 1996/7 tax year when the scheme ceased to be eligible and withdrawal of approval took effect under the Revenue’s notice (and therefore that the Revenue is out of time to impose the assessment). The First-tier tribunal, Upper Tribunal and Court of Appeal all considered that the tax charge fell in the 2000/1 tax year.

In giving the lead majority judgment Lord Sumption stated that the conditions for liability to the tax charge in ss 591C(4)-(6A) of the Act only make sense on the footing that the “cessation of the approval of the scheme” is the effective date of the withdrawal of the approval and not the date of the notice itself. This is also the outcome which makes most sense as a matter of language and of principle: it avoids double taxation, and ensures that the fund is valued while it is still intact.

He reasoned that the Revenue’s concern that it will often take more than the six-year time limit to identify abusive schemes and issue the requisite notice is better addressed through the Revenue’s power to make regulations requiring the provision of information relating to any approved scheme; accepting the Revenue’s argument would effectively mean that there would be no time limit and that it could choose the chargeable period at its discretion.


For judgment, please download: [2015] UKSC 56
For Court’s press summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watching the hearing please visit: Supreme Court website