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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Irving v HM Revenue & Customs  EWCA Civ 6 (25 January 2008)
Cite as:  STI 186,  BTC 36, 79 TC 836,  EWCA Civ 6,  Pens LR 197,  STC 597
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Justice Blackburne)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE MAURICE KAY
LORD JUSTICE RIMER
| JOHN LESLIE IRVING
|- and -
|THE COMMISSIONERS OF HER MAJESTY'S REVENUE AND CUSTOMS
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A Merrill Communications Company
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Mr Philip Jones QC (instructed by HMRC's Solicitor's Office) for the Respondent
Hearing date : 5 November 2007
Crown Copyright ©
Lord Justice Rimer :
"(4) Any sum paid by an employer by way of contribution under the scheme shall, for the purposes of Case I or II of Schedule D and of sections 75 and 76, be allowed to be deducted as an expense, or expense of management, incurred in the chargeable period in which the sum is paid …
(5) The amount of an employer's contributions which may be deducted under subsection (4) above shall not exceed the amount contributed by him under the scheme in respect of employees in a trade or undertaking in respect of the profits of which the employer is assessable to tax (that is to say, to United Kingdom income tax or corporation tax).
(6) A sum not paid by way of ordinary annual contribution shall for the purposes of subsection (4) above be treated, as the Board may direct, either as an expense incurred in the chargeable period in which the sum is paid, or as an expense to be spread over such period of years as the Board think proper. …"
"(1) Subject to the provisions of this Chapter, where, pursuant to a retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for any employee of that employer, then (whether or not the accrual of the benefits is dependent on any contingency) –
(a) the sum paid, if not otherwise chargeable to income tax as income of the employee, shall be deemed for all purposes of the Income Tax Acts to be income of that employee for that year of assessment and assessable to tax under Schedule E; and
(b) where the payment is made under such an insurance or contract as is mentioned in section 266, relief, if not otherwise allowable, shall be given to that employee under that section in respect of the payment to the extent, if any, to which such relief would have been allowable to him if the payment had been made by him and the insurance or contract under which the payment is made had been made with him. …
(4) Where the employer pays any sum as mentioned in subsection (1) above in relation to more than one employee, the sum so paid shall, for the purpose of that subsection, be apportioned among those employees by reference to the separate sums which would have had to be paid to secure the separate benefits to be provided for them respectively, and the part of the sum apportioned to each of them shall be deemed for that purpose to have been paid separately in relation to that one of them.
(5) Any reference in this section to the provision for an employee of relevant benefits includes a reference to the provision of benefits payable to that employee's wife or widow, children, dependants or personal representatives."
"(2) Section 595(1) shall not apply for any year of assessment –
(a) where the employee performs the duties of his employment in such circumstances that no tax is chargeable under Case I or II of Schedule E in respect of the emoluments of his employment (or would be so chargeable were there such emoluments), or
(b) where the emoluments from the employment are foreign emoluments within the meaning of section 192 and the Board are satisfied, on a claim made by the employee, that the retirement benefits scheme in question corresponds to such a scheme as is mentioned in paragraph (a), (b) or (c) of subsection (1) above.
(3) Where, in respect of the provision for an employee of any relevant benefits –
(a) a sum has been deemed to be income of his by virtue … of subsection (1) of section 595, and
(b) subsequently, the employee proves to the satisfaction of the Board that –
(i) no payment in respect of, or in substitution for, the benefits has been made, and
(ii) some event has occurred by reason of which no such payment will be made,
and makes application for relief under this subsection within six years from the time when that event occurred,
the Board shall give relief in respect of tax on that sum by repayment or otherwise as may be appropriate; and if the employee satisfies the Board as mentioned above in relation to some particular part, but not the whole, of the benefits, the Board may give such relief as may seem to them just and reasonable."
"(1) Where in any year of assessment a person receives a benefit provided under a retirement benefits scheme which is not of a description mentioned in section 596(1)(a), (b) or (c), tax shall be charged in accordance with the provisions of this section.
(2) Where the benefit is received by an individual, he shall be charged to tax under Schedule E for that year.
(3) Where the benefit is received by a person other than an individual, the administrator of the scheme shall be charged to tax under Case VI of Schedule D for that year.
(4) Subject to subsection (9) below the amount to be charged to tax is –
(a) in the case of a cash benefit, the amount received, and
(b) in the case of a benefit in kind, an amount equal to whatever is the cash equivalent of the benefit.
(5) In the case of the charge under Case VI of Schedule D, the rate of tax is 40% or such other rate (whether higher or lower) as may for the time being be specified by the Treasury by order.
(6) Tax shall not be charged under this section in the case of –
(a) any pension or annuity which is chargeable to tax under Schedule E by virtue of section 19(1); or
(b) any pension or other benefit chargeable to tax under section 58.
(7) But where the amount chargeable to tax as mentioned in subsection (6)(a) above is less than the amount which would be chargeable to tax under this section –
(a) subsection (6)(a) above shall not apply, and
(b) the amount chargeable to tax under this section shall be reduced by the amount chargeable to tax by virtue of section 19(1).
(8) Subject to subsection (9) below, tax shall not be charged under this section (or section 19(1) or 148) in the case of a lump sum where –
(a) the employer has paid any sum or sums with a view to the provision of any relevant benefits under a retirement benefits scheme;
(b) an employee has been assessed to tax in respect of the sum or sums by virtue of section 595(1); and
(c) the lump sum is provided under the scheme to the employee, any person falling within section 595(5) in relation to the employer or any other individual designated by the employee.
(9) Where any of the income or gains accruing to the scheme under which the lump sum is provided is not brought into charge to tax, tax shall be charged under this section on the amount of the lump sum received less any deduction applicable under subsection (10) or (11) below.
(10) Subject to subsection (11) below, the deduction applicable is the aggregate of –
(a) any sum or sums in respect of which the employee has been assessed as mentioned in subsection (8)(b) above, and
(b) any sum or sums paid by the employee,
which in either case were paid by way of contribution to the provision of the lump sum. …"
The decisions below of the Special Commissioners and of Blackburne J
"(2) Subject to the exemptions and provisions contained in the next succeeding section, where –
(a) an agreement is in force between a body corporate and a director or employee thereof for the provision for him of any future retirement or other benefits afforded by a retirement benefits scheme, or a person is serving as a director or employee of a body corporate in connection wherewith there is a retirement benefits scheme relating to persons of the class within which he falls under which any such benefits will be provided for him; and
(b) the body corporate does not, or does not fully, secure the provision of the benefits by the payment of such sums as are mentioned in the preceding subsection; and
(c) the circumstances in which the benefits are to accrue are not such as will render the benefits assessable to income tax under Schedule E as emoluments of his office as a director or of his employment,
then (whether or not the accrual of the benefits is dependent on any contingency), in each year of assessment in which the agreement is in force or the director or employee is serving as aforesaid, up to and including the year of assessment in which the benefits accrue or there ceases to be any possibility of the accrual thereof, a sum equal to the annual sum which the body corporate would have had to pay in that year under a contract with a third person which secured the provision by that third person of those benefits or, as the case may be, of those benefits so far as not already secured by the payment of such sums as are mentioned in the preceding subsection, shall be deemed for all the purposes of the Income Tax Acts to be income of the director or employee for that year and assessable to income tax under Schedule E."
"(1) In computing the amount of the profits or gains to be charged under Case I or Case II of Schedule D, no sum shall be deducted in respect of any expenses falling within subsection (2) or (3) below; and no expenses falling within either of those subsections shall be treated for the purposes of section 75 of the Taxes Act 1988 (investment companies) as expenses of management.
(2) Subject to subsection (6A) below, expenses fall within this subsection if –
(a) they are expenses of providing benefits pursuant to a relevant retirement benefits scheme, and
(b) the benefits are not ones in respect of which a person is on receipt chargeable to income tax.
(3) Subject to subsection (6A) below, expenses fall within this subsection if –
(a) they are expenses of paying any sum pursuant to a relevant retirement benefits scheme with a view to the provision of any benefits, and
(b) the sum is not one which when paid is treated as the income of a person by virtue of section 595(1) of the Taxes Act 1988 (a sum paid with a view to the provision of any relevant benefits for an employee).
Lord Justice Maurice Kay
Lord Justice Sedley