[2012] UKFTT 291 (TC)
TC01979
Appeal number: TC/2011/02298
Income tax – pensions – late notification of claim for
enhanced protection – whether reasonable excuse – on the facts, yes – appeal
allowed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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CHARLES IRBY
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE JOHN WALTERS QC
SHEILA WONG CHONG FRICS
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Sitting in public at Bedford Square , London on 14 November 2011
Stephen Midwinter, Field
Fisher Waterhouse, for the Appellant
Alan Bush, HMRC Pensions
Office, for the Respondents
© CROWN COPYRIGHT
2012
DECISION
1. The
appellant, Mr Charles Irby (“Mr Irby”) appeals against the refusal of the
Respondent Commissioners (“HMRC”) to consider information provided by Mr Irby
in a notification given pursuant to regulation 4 of the Registered Pension
Schemes (Enhanced Lifetime Allowance) Regulations 2006 (“the Regulations”) but
after the closing date specified in regulation 4(4) of the Regulations, which
is 5 April 2009. The notification was given by Mr Irby on 20 September 2010.
2. Although
regulation 4(3) of the Regulations requires that a notification under the
regulation must be given on or before the specified closing date, regulation
12(2) of the Regulations provides that HMRC must consider information provided
in a notification given after the closing date if they are satisfied that
regulation 12(1) of the Regulations applies.
3. Regulation
12(1) is as follows:
‘(1) This regulation
applies if an individual-
(a) gives a notification to the Revenue and Customs after
the closing date,
(b) had a reasonable excuse for not giving the
notification on or before the closing date, and
(c) gives the notification without unreasonable delay
after the reasonable excuse ceased.’
4. HMRC by a
letter to Mr Irby dated 24 September 2010 declined to accept Mr Irby’s late
notification dated 20 September 2010. That decision was confirmed (on
different or additional grounds) in a letter sent by HMRC to Mr Irby and dated
7 January 2011 and, following an internal review, in a letter sent by HMRC to
Mr Irby and dated 21 February 2011.
5. Regulation
12(4) of the Regulations gives a right of appeal to the Tribunal against a
refusal to consider information provided in a late notification. Mr Irby
appealed pursuant to this provision on 22 March 2011. The Tribunal’s
jurisdiction on the appeal is to determine whether the individual (Mr Irby)
gave the notification to HMRC in the circumstances specified in regulation
12(1) of the regulations (see above) (regulation 12(7)). If we allow the
appeal (as we have) our function is to direct HMRC to consider the information
provided in the notification (regulation 12(8)).
6. With
regard to the question whether Mr Irby gave the notification to HMRC in the circumstances
specified in regulation 12(1), it is of course accepted by HMRC that the
notification was given after the closing date (paragraph (1)(a)); it is also
accepted by HMRC that if (which they deny) Mr Irby had a reasonable excuse for
not giving the notification on or before the closing date, then he gave the
notification (on 20 September 2010) without unreasonable delay after the
reasonable excuse ceased (paragraph (1)(c)). The only point in issue is
whether or not Mr Irby indeed had a reasonable excuse for not giving the
notification on or before the closing date (paragraph (1)(b)).
7. Mr Irby
made a Witness Statement (dated 29 October 2011) and was cross-examined on it
by Mr Bush, for HMRC. Apart from this evidence we also had before us bundles of
documents (largely duplicating each other) produced by the parties
respectively.
8. From the
evidence we find the following facts.
9. Mr Irby
was aged 65 when he made his Witness Statement (on 29 October 2011). He is a
retired corporate financier. He was Deputy Chairman of Baring Brothers
International Limited between 1997 and 1999. In 1999, as he was preparing to
leave that position, he decided to seek financial advice about his pension
arrangements. He engaged David Scott of Scott Goodman Harris (“SGH”) as his
financial adviser. SGH received remuneration for their work. Mr Irby has (and
had) no expertise in pensions or personal finance and so relied on Mr Scott’s
financial advice, initially as to what arrangements he should enter into and
then as to the management of those arrangements.
10. On Mr Scott’s advice Mr Irby
set up (a) a self-invested personal pension plan (a “SIPP”) with James Hay
Pension Trustees Limited as trustee, and (b) a separate insurance policy which
was consolidated into the SIPP in December 2010.
11. As at 6 April 2006 (the day
after the closing date specified in regulation 4(4) of the Regulations) the
total value of Mr Irby’s pension arrangements was £4,284,409.
12. On 24 March 2004 Mr Scott
from SGH wrote to Mr Irby to inform him that SGH was to be acquired by UBS AG
Wealth Management (“UBS”) and that UBS’s Terms and Conditions of Business would
replace the existing SGH terms and conditions with effect from 6 April 2004.
Mr Irby was assured that there were in fact few significant changes and that
the basis of the relationship would broadly remain unchanged. Mr Scott wrote
that SGH was anticipating continuing its relationship with Mr Irby within the
new UBS structure and asked for Mr Irby’s agreement to this. Mr Irby was
content that this should happen and thereafter relied on UBS for financial
advice accordingly.
13. On 9 September 2004 Mr Irby
was entertained to lunch by Mr Scott and in the course of conversation Mr Scott
mentioned to him some new rules regarding SIPPs. On 23 September 2004 Mr Irby
wrote to Mr Scott at UBS, asking (inter alia) for a simple explanation
of the new rules governing his SIPP.
14. On 1 October 2004 Mr Scott
wrote to Mr Irby explaining that the new rules would take effect on 6 April
2006 and that all the relevant regulations had not at the time of writing been
published. Relevantly for present purposes, he wrote:
‘The
legislation allows for the protection of the current position with regard to
the tax-free cash and growth on the pension. We will have to make an election
before 6th April 2004 specifying the maximum tax-free cash at that
point, which will then be preserved plus indexation. This election will also
ensure that the fund will not be taxed, even though the value exceeds the
proposed lifetime limit.’
15. The reference to 6 April
2004 was an obvious error.
16. On 7 October 2005, Mr Scott
wrote to Mr Irby informing him that due to his own increasing responsibilities
he had arranged ‘additional support’ for Mr Irby. He mentioned two individuals
who would be able to assist Mr Irby (as well as himself) – Philip Sutton and
Zoe Vucicevic (“ZV”). Mr Scott wrote that ZV would ‘be able to assist on all
areas that require FSA authorisation’.
17. Mr Irby first met ZV in
January 2006 at UBS’s offices. On 12 January 2006, ZV wrote to Mr Irby
summarising the main points raised in their discussion. This does not appear
to have touched on the question of notification
to be given by Mr Irby pursuant to regulation 4 of the Regulations. There
ensued further correspondence which also did not touch on that question.
18. Mr Irby met ZV again at
UBS’s offices on 28 June 2006. We had in evidence copies of handwritten notes
taken by Mr Irby at that meeting on UBS stationery. During that meeting (as
evidenced by the notes) an application for enhanced protection (which can only
mean a notification pursuant to regulation 4 of the Regulations, which came
into force on 6 April 2006) was discussed. Mr Irby wrote in his notes
‘*Enhanced Protection to be applied by UBS’.
19. Mr Irby’s evidence (which we
accept) is that when it came to applying for enhanced protection, he understood
from his discussion with ZV that an application needed to be made and that UBS
would take care of it. He was not aware of the process or that input would be
needed from him. He understood that the application could (and would) be made
by UBS on his behalf without the need for his involvement.
20. Mr Irby accepted that
between the time of the meeting with ZV on 28 June 2006 and the closing date
for notifications under regulation 4 of the regulations (5 April 2009) he had
seen various headlines in the press regarding the need to file an application
with HMRC, but he was confident that they referred to the application for
enhanced protection which had been mentioned in his meeting with ZV and that
UBS would be dealing with it or had already dealt with it. He did not feel the
need to enquire as to UBS’s progress in the matter or to take any further
action.
21. ZV left UBS in 2008.
Jennifer Flood (“JF”) became Mr Irby’s primary point of contact. Mr Irby met
JF on 8 July 2008. She emailed him later that day saying: ‘I am meeting with
our Pension expert tomorrow and will come back to you with the answers to your
SIPP questions’. However Mr Irby has no record of JF coming back to him with
the answers to these questions.
22. The next relevant event was
a meeting between Mr Irby and Philip Swallow (“PS”) of UBS. This happened on
16 January 2009. During this meeting PS raised the issue of enhanced
protection of Mr Irby’s SIPP and Mr Irby said that ZV had said that UBS would apply
for and obtain enhanced protection for him. PS said that he would check that
UBS had indeed done so. In an email sent by PS to Mr Irby later that day, PS
said: ‘I will double check the position on ‘pension protection’ and get back to
you on this shortly’.
23. Mr Irby’s evidence (which we
accept) is that it was his understanding that if there had been as issue in
relation to the position on his pension protection, then PS would get back to
him. He did not do so. Mr Irby remained fully confident that UBS could make
the relevant application to HMRC on his behalf and without any involvement of
his. He was not aware that there was a closing date for applications for
pension protection or that it was 5 April 2009.
24. Subsequently Mr Irby’s
affairs at UBS were taken over by Alexander Wood (“AW”).
25. In 2010 Mr Irby decided to
change the trustee of his SIPP from James Hay Pension Trustees Limited to
Michael J. Field. In the course of discussions with Michael J. Field the fact
that Mr Irby should have a certificate in relation to enhanced protection was
mentioned to him. Again, Mr Irby told Michael J. Field that he understood that
UBS had dealt with this. He emailed JF on 17 May 2010 as follows:
‘A
while ago, maybe 2 years, at a meeting with you and your pension man, whose
name escapes me, you (he) checked out my situation and applied for enhanced
protection for my funds. Can you confirm that you did so and that you hold a
protection certificate? James Hay, my SIPP provider, has no record of one.’
26. Mr Irby did not receive a
response to this email (perhaps because it was sent to JF, not AW).
27. In July 2010 Mr Irby chased
UBS. On 16 July 2010, AW emailed Mr Irby informing him that UBS had been
‘unable to uncover anything yet’ and suggesting that Mr Irby himself contact
HMRC ‘and request that they advise you as to whether the certificates were ever
produced’.
28. Mr Irby contacted HMRC on 2
August 2010, who told him that no certificate had been produced. Mr Irby
explained to the man with whom he spoke at HMRC (whose name he did not note)
that this had been an oversight on the part of his advisers and asked what he
should do. He was advised to send a form APSS 200 (Protection of Existing
Pension Rights) with an explanation of what had happened, to obtain a
certificate. Mr Irby understood from the conversation that there would be no
problem obtaining a certificate.
29. On 3 August 2010 Mr Irby
asked Michael J. Field to obtain the necessary information to allow an
application to be completed. Michael J. Field provided Mr Irby with a draft
form and advice by letter dated 14 September 2010, after having obtained the
necessary information. This letter was sent to Mr Irby while he was in New Zealand on business. He returned from New Zealand on 18 September 2010 and on 20
September 2010 he sent a letter to HMRC enclosing the completed form APSS 200
and explaining the circumstances in which he did not have the relevant
certificate and asking for a certificate to be issued.
30. HMRC replied on 24 September
2010 refusing to accept late notification (see: paragraph 4 above).
31. To give a flavour of the
significance of the matter in issue, Mr Irby states that he has been advised by
Michael J. Field that if he obtains enhanced protection he will be able to take
a tax-free lump sum of £1,265,000 and have a fund of £4,235,000 with which to
purchase an annuity. Whereas without enhanced protection, if he used the same
amount of the fund to purchase an annuity he would only be able to take a
tax-free lump sum of £340,000 - £925,000 less than would be the position if he
had enhanced protection.
32. Mr Irby has made a formal
complaint to UBS about their conduct in the matter. UBS have not accepted
liability and the matter is ongoing.
33. Mr Midwinter, for Mr Irby,
submitted that Mr Irby reasonably relied on his understanding that UBS would
make the necessary application to HMRC in time. He referred to a decision of
Special Commissioner Shipwright, Rowland v HMRC SPC00548 (14 June 2006),
and two decisions of the Tribunal, Scurfield v HMRC (Judge Tildesley and
Mr Adams) (TC01379)(5 August 2011) and Platt v HMRC (Judge Berner and Mr
Adams) (TC/2011/0841)(15 September 2011).
34. In Rowland, the
Special Commissioner found that the taxpayer had a reasonable excuse for her
failure to pay tax on the due date because she had been advised by reputable
specialist accountants who had prepared her tax return that she only had to pay
a lower amount. Her reliance on the accountants was reasonable and that
reliance had led to the underpayment.
35. In Scurfield, the
Tribunal found that the appellant’s ignorance of the legal provisions dealing
with protection of pension benefits had no rational basis and did not
constitute a reasonable excuse for his late application for lifetime allowance
protection. The appellant had argued that it was reasonable for him not to
have had the services of a financial adviser at the time of the changes to tax
relief on pension benefits but the Tribunal found that in the special
circumstances of the case the appellant without financial advice could
reasonably have been expected to discover the need to apply for protection of
his benefits on or before 5 April 2009.
36. In Platt, which was
another appeal about a late notification of a claim for enhanced protection,
the Tribunal found that the appellant, who relied on his ignorance of a novel
and transitional requirement, affecting only a limited number of people (the
requirement to make a notification on or before 5 April 2009), did not have a
reasonable excuse because the cause of that ignorance was that it was
unreasonable of him not to have sought independent advice as a relevant article
published in December 2008 had suggested. The Tribunal commented that it was
reasonable to assume that such advice would have enabled ‘the reasonable individual’
to have made an informed decision whether to make a claim, and if a claim was
to have been made, then to have done so before the closing date.
37. Mr Midwinter submitted that
these 3 decisions made it clear that Mr Irby’s appeal ought to be allowed. It
was perfectly reasonable for Mr Irby to rely on UBS advice in relation to his
pension (see Rowland) and he took the very step which the Tribunals in Scurfield
and Platt decided that a reasonable man ought to have taken – he
sought advice.
38. Mr Midwinter also cited Smith
v Eric S Bush [1990] 1 AC 831, a case about a surveyor’s negligence, for
the proposition that in deciding the question of whether Mr Irby had a
reasonable excuse for the late notification, the Tribunal should consider the
practical consequences of its decision on Mr Irby and the public purse
respectively. He made the point that the consequence to Mr Irby of the late
notification not being accepted would be much more serious than the consequence
to the public purse of allowing the appeal.
39. Mr Bush, for HMRC, focussed
on the meeting between Mr Irby and PS of UBS on 16 January 2009, when PS raised
the issue of enhanced protection of Mr Irby’s SIPP and Mr Irby said that ZV had
said that UBS would apply for and obtain enhanced protection for him. As
stated above, PS said that he would check that UBS had indeed done so. In an
email sent by PS to Mr Irby later that day, PS said: ‘I will double check the
position on ‘pension protection’ and get back to you on this shortly’. In
particular, Mr Bush focussed on the fact that PS did not get back to Mr Irby on
this point and Mr Irby did not go back to UBS to check the position before the
closing date (5 April 2009).
40. Mr Bush submitted that a
reasonable person would have gone back to UBS much sooner than Mr Irby did, or
at least agreed with UBS a deadline for establishing the position about
enhanced protection and then followed the matter up when the deadline had
passed. He submitted that Mr Irby was aware of an unresolved issue in respect
of enhanced protection and did not go back to check the position with UBS
within a reasonable timescale. In these circumstances Mr Irby’s assumption
that UBS had established that enhanced protection was in place does not, in Mr
Bush’s submission, afford him a reasonable excuse for his late notification.
41. Mr Bush submitted, in
particular, that a reasonable person in Mr Irby’s position, even if placing
reliance on UBS to ‘take care of anything without checking that they had’ done
so, could and should have made himself aware of the closing date for
notification from publicly available sources. Mr Bush prayed in aid the
decisions in Scurfield and Platt in which no reasonable excuse
was found, and invited the Tribunal not to follow the decision in Rowland,
because although Mrs Rowland had relied on her advisers, her tax affairs in
relation to which she had been advised were technically complex, unlike the
position here where the matter in relation to which Mr Irby relies on UBS’s
advice is not complicated – being simply the need to submit the relevant
notification on or before 5 April 2009.
42. We announced at the end of
the hearing on 14 November 2011 that we would allow Mr Irby’s appeal. Pursuant
to regulation 12(8) of the Regulations, we direct HMRC to consider the
information provided in Mr Irby’s late notification.
43. Our reason for allowing Mr
Irby’s appeal is that we find that he relied on UBS to make the necessary
notification in time on his behalf and that such reliance was reasonable.
Therefore he has a reasonable excuse for the late notification within
regulation 12(1)(b) of the Regulations.
44. We accept that a more
prudent person could (and would) have made himself aware of the closing date
after the meeting with UBS on 16 January 2009 and chased up UBS for the result
of PS’s ‘double check’ on the position on pension protection. We also accept
that such would have been reasonable conduct.
45. But the categories of
reasonable conduct encompass more than one course of action. Our task is not
to identify a reasonable course of action which Mr Irby did not take and
deduce from the fact that he did not take it that he had no reasonable excuse
for the course of action that he did take. Our task is to examine what
Mr Irby did and determine whether what he did was the action of a reasonable
person. We consider it was, and that our approach is entirely consistent with
the reasoning of the Tribunal in Platt, which is the decision in which (of
the decisions cited to us) the concept of reasonable excuse in this context is
most fully explored.
46. With respect to Mr
Midwinter, we consider that it is not relevant to the question of whether or
not Mr Irby had a reasonable excuse for his late notification to consider the
consequences of a decision one way or the other. This is, in our view, likely
to lead to confusion. The closing date for notifications had been laid down
officially well in advance and advertised widely. Late notifications can only
be considered if a reasonable excuse for the notification being late is shown.
There is no warrant for an approach which might regard an excuse as reasonable
if the consequences of non-consideration of the notification were more severe
to the taxpayer and as not being reasonable if the consequences were less
severe to the taxpayer.
47. This document contains full
findings of fact and reasons for the decision. Any party dissatisfied with this
decision has a right to apply for permission to appeal against it pursuant to
Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules
2009. The application must be received by this Tribunal not later than 56
days after this decision is sent to that party. The parties are referred to
“Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)”
which accompanies and forms part of this decision notice.
JOHN WALTERS QC
TRIBUNAL JUDGE
RELEASE DATE: 23 April 2012
