Loose Ends - Early retirement appeal case

A decision of a Special Commissioner given in September 2000 concerned the meaning of retirement in relation to a pension scheme. The case was Venables and the Trustees of the Fussell Pension Scheme v Hornby (SpC 265) and it concerned an executive director who retired in 1994 from that position but continued as a non-executive director. The Revenue was seeking to tax the lump sum payment which he received at that stage, basing its contention on the fact that there was no actual retirement in view of the continuing non-executive directorship. The case was reported more fully in Taxation, 11 January 2001 at page 347.

The Special Commissioner decided the early retirement point against the Revenue, but the case was still lost on a secondary point concerning the trust deed. It is expected that the case will go further.

The appellants are seeking to establish an appeal consortium for funding this as a test case and interested parties are therefore requested to contact Matthew Harrison of C W Fellowes Ltd on 01962 870544.

Reinvestment relief trap

Correspondence with Revenue capital gains tax specialists has confirmed a possible trap where life interest trustees claim reinvestment relief into enterprise investment scheme shares. If the life tenant dies before the scheme investment has been sold, or some other event occurs to trigger the deferred gains, this is a deemed disposal for capital gains tax purposes (section 71(1) or 72(1), Taxation of Chargeable Gains Act 1992) even though no taxable gain arises on the enterprise investment scheme shares which pass to the remainderman or succeeding life tenant. Where an individual who has claimed reinvestment relief and owns enterprise investment scheme shares personally dies, this does not trigger the deferred gains because paragraph 3(5) of Schedule 15B to the Taxation of Chargeable Gains Act 1992 specifically excludes it. However, this is phrased in terms of the death of the 'investor' and when it is trustees who make the investment, there is no similar exclusion for the death of the life tenant. The moral may be that trustees should insure against this crystallisation of the deferred gains because, otherwise, there will be a capital gains tax bill with no corresponding cash to pay it.

David Williams,

Smith & Williamson,

London W1.

Revenue travelling and subsistence

The following figures are the applicable rates from 1 July 2000 of subsistence allowances for Revenue staff. Readers should note that Revenue manuals discourage Inspectors from applying them more widely.

Night subsistence

Payment consists of three elements:

(1) Bed and breakfast limits

Actual expenditure will be reimbursed within these limits. Receipts must be provided.

(2) Night subsistence allowance £21

This allowance is paid in addition to the 'actual' bed and breakfast costs.

(3) Personal expenses allowance £4.50

This is paid to cover incidental expenditure associated with night subsistence or residential courses.

Overnight stay with friends or relatives £25

This allowance is paid instead of (1) and (2) above but still attracts (3) above.

Retention of rooms Receipted expenditure

up to the maximum of £6.05

Issued by Financial Accounting Office, Travelling and Removals Section, Barrington Road, Worthing.

Conflicting rules for buy-backs

One of the conditions to be fulfilled if a company buy-back of shares is to be treated as a capital matter is that the shares in question have been owned by the vendor for at least five years. For this purpose identification is on a first-in first-out basis. However, the share identification rules at section 106A, Taxation of Chargeable Gains Act 1992 match on a last-in first-out basis. So which rule takes priority? The key is to understand that both apply! First-in first-out applies only for the purpose of deciding whether the five-year rule has been satisfied. But when one comes to work out the gain, one follows the normal share identification rule.

David Whiscombe,

Berg Kaprow Lewis,

London N3.

Issue: 3801 / Categories: