By Federico M.A. Cincotta
In 2012 HMRC issued a series of assessments against pension fund holders who had transferred their pensions in 2007-8 from UK pension funds to a Singapore based fund, ROSIIP. The assessments were for 55% of the pension savings transferred on the basis that the transfers were not to an authorised fund. ROSIIP had at the time been accepted by HMRC as an authorised fund (a QROPS) and listed as such on HMRC’s website. HMRC maintained that it had nevertheless never been a QROPS and statements by HMRC to the contrary effect could not be relied upon. At around the same time HMRC had exonerated from assessment investors in another similarly placed scheme, the Beazley scheme, even though on that occasion HMRC suspected the investors of tax avoidance motives, while no such suspicion was raised against the ROSIIP investors. We ran the challenge to these assessments under a GLO.
On the last day of the hearing of the ROSIIP GLO HMRC withdrew all the assessments to tax and undertook to issue guidance on how it would treat transfers to overseas pension funds.
That guidance has now been issued although confusingly referring to the ROSIIP GLO as “R (Gibson) v Commissioner for HM Revenue and Customs”, one of the test cases, rather than its official title.
HMRC will not raise assessments from transfers from a registered pension scheme to an overseas scheme provided that 1) the transfer took place before 24 September 2008; and 2) the scheme was included on the list as a QROPS when the transfer took place (or at a time reasonably proximate to the transfer). This is subject to an obvious proviso in case of dishonesty, abuse, artificiality, etc.
The date of the 24 September 2008 represents when HMRC assert a caveat was placed on its website alerting readers that they could not rely on the inclusion of a fund on HMRC’s QROPS list as evidence that it was in fact a QROPS. For transfers made after that date to funds appearing on the QROPS list HMRC indicate that HMRC will consider whether to issue assessments “in the light of the principle of conspicuous unfairness”. No further explanation is given as to whether that should mean that a transfer made in good faith in reliance on the entry of the recipient fund on the QROPS list would not be assessed to tax. In the ROSIIP litigation it was contended that the proper statutory construction of the provisions meant that the entry of a fund on the list amounted to an assessment that it was a QROPS irrespective of any such caveat and that were that not the case the provisions would offend legal certainty. With the withdrawal of the assessments no judgment will be delivered on that point.
This article appears in the JHA December 2013 Tax Newsletter, which also features:
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Originally printed in Tax Journal on 1 Nov 2013.
Michael Anderson and Samantha Wilson examine the recent High Court ruling on Prudential, the test case in the CFC and dividend GLO.
Under the credit system in place before 2009, non-resident dividend income from the EU/EEA is not to be regarded as exempt but as taxable with credit, in addition to withholding tax, for the higher of the tax actually paid on the profits or the nominal (statutory) rate of the jurisdiction of the dividend paying company. The same outcome applies where the investment is below a controlling interest for dividends from all jurisdictions outside the EU/EEA as well. Where possible, tax returns must be amended to claim the enhanced credit, rather than to show the non-resident income as exempt. The claimants are entitled to compound interest on overpaid tax. HMRC’s ‘change of position’ defence is contrary to EU law.
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Originally printed in International Tax Review Premium on 31 October 2013
UK tax payers will need to amend any open returns to show foreign portfolio income as carrying a tax credit following the England and Wales High Court’s ruling in the Prudential case last week.
Nicola Hine, of Joseph Hage Aaronson, the firm acting for the claimants in the case, explains why the judgment should be welcomed by tax payers with claims for interest on overpaid tax.
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Originally printed in International Tax Review Premium on 1 October 2013
The Franked Investment Income Group Litigation (FII GLO) concerning claimants’ rights to recover overcharged tax from HM Revenue & Customs (HMRC) has been batted back and forth between the UK courts and the European Court of Justice (ECJ) since 2006. Philippe Freund explains why an Advocate General’s opinion on the third reference to the ECJ has given taxpayers cause to be optimistic.
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Originally printed in Tax Journal on 13 September 2013
The advocate general’s opinion on Test Claimants in the FII Group Litigation v HMRC (Case C-362/12) was delivered on 5 September. The advocate general’s opinion expressly follows the reasoning of the majority in the Supreme Court. The principle of effectiveness, he considers, is engaged whenever a domestic remedy is used to enforce an EU right. That principle prohibits the reduction in a time limit without both notice and transitional arrangements: ‘a legal remedy cannot offer “effective” protection unless the conditions in accordance with which it may be used and achieve a positive outcome are known in advance’ (para 47). The existence of another remedy would not cure an incompatibility with EU law.
He also concludes, again in keeping with the majority of the Supreme Court, that the principles of legitimate expectation and legal certainty are also offended. The claimants were entitled to expect that their claims would be ruled upon on the basis of what the law was determined to be and not to be deprived of that right by statute.
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C-350/11 Agenta Spaarbank NV v Belgische Staat
On 4 July 2013, the CJEU held that the Belgian notional interest deduction regime is contrary to EU law. Under the rules, Argenta Spaarbank was denied the notional interest deduction on its equity to the extent of the net asset value of its permanent establishment situated in the Netherlands. Had the permanent establishment been established in Belgium, no reduction in respect of the permanent establishment’s assets would have to be made. The Court concluded that the regime discouraged a Belgian company from carrying out its activity through a permanent establishment situated in another state and, consequently, amounted to a breach of the freedom of establishment in Article 49 TFEU.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
The 3rd reference in the FII GLO took place in the ECJ on 26 June. The reference concerned whether the retrospective reduction in the limitation period for mistake claims issued on or after 8 September 2003 (s320 FA 04) offended EU rights. The Supreme Court concluded in May 2012 that the like provisions which hit claims issued before that date (s107 FA 07) infringed EU law principles but could only reach the same decision for s320 FA 04 by a majority (5:2) and therefore referred the matter to the ECJ. The Advocate General’s opinion is expected to be released on 5 September 2013.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
A last minute amendment to the Finance Bill 2013 announced on 26 June 2013 has significantly limited the ability to make an interim payment application in High Court proceedings for repayment of tax. Such applications can now only be made in cases of financial hardship (where the payment of the sum is necessary to enable the proceedings to continue) or where “the circumstances of the claimant are exceptional and such that the granting of the remedy is necessary in the interests of justice.” Applications made before 26 June are not affected.
The legality of the changes seems questionable given their abrupt and retrospective introduction and the fact that in practice they target EU law claims.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
The ROSIIP GLO concerned the imposition of a 55% tax charges against pension-holders who had transferred their UK pensions into the Singapore ROSIIP Pension Fund. At the time of transfer, ROSIIP had been listed on HMRC’s website as a QROPS – transfers to which attract no charge to tax. The fund was retrospectively withdrawn from HMRC’s list in 2008 so that transfers made prior to its withdrawn were said to be “unauthorised payments” and were assessed to the 55% charges.
The pension holders argued that HMRC could not impose the tax charges against them because they had obtained a legitimate expectation from HMRC that they would not be subject to tax on their transfers. On the fifth day of the hearing, HMRC accepted that they could not maintain their assessments against the claimants and the assessments were withdrawn. The background to the withdrawal of these assessments suggests that HMRC may not be able to impose tax charges against individuals who make transfers into other funds which appeared on the QROPS list and were later removed retrospectively.
If you or your clients receive an assessment or enquiry in circumstances similar to those described above, please contact us.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
The High Court hearing concluded on 19 July. The hearing dealt with issues arising out of corporation tax charges on foreign-source portfolio dividends, ACT charges on their onward payment and a number of issues specific to life assurance and pension business, as well as remedies, including the availability of compound interest, and HMRC’s contention that unlawful tax paid under a mistake could not be recovered where the UK had applied its tax revenues against government expenditure (“the change of position” defence). Judgment has been reserved.
Similar issues will be considered in the context of dividends from subsidiaries at the hearing of the FII GLO, which is listed for 29 April 2014.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
