Spc00638

INCOME TAX — male appellant in receipt of pension from former employer — whether claim to transfer one half of pension income to wife effective — no — male appellant liable to income tax on full pension paid to him — wife not entitled to one half of pension purportedly transferred — therefore not entitled to repayment of tax allegedly overpaid — appeal dismissed

THE SPECIAL COMMISSIONERS

 
 	(1)  MR ALAN STUBBS 
	(2)  MRS MARGARET STUBBS	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Special Commissioner: David Demack

Sitting in public in Manchester on 23 August 2007

The Appellants did not appear and were not represented

Miss June Kennerley of Her Majesty’s Revenue and Customs for the Respondents  

	© CROWN COPYRIGHT 2006

DECISION

1.	These are the appeals of Mr Alan Stubbs and his wife Mrs Margaret Stubbs against amendments made by the Commissioners of Revenue and Customs (“the Commissioners”) to their self-assessment income tax returns for the tax years ended in 2005 and 2006 and against associated closure notices.  They were heard together as they concerned the taxation of income said to have been transferred by Mr Stubbs to Mrs Stubbs.
2.	The point at issue in the appeals is whether Mr Stubbs, who is entitled to a pension from a former employer, may transfer one half thereof to his wife for income tax purposes, and thereby enable her to take advantage of her personal allowance which is not fully utilised.  
3.	Although on 15 January 2007, Mr and Mrs Stubbs signed forms appealing against the revenue amendments to their tax returns and requiring their appeals to go before the Special Commissioners, in a letter of 10 July 2007 they subsequently maintained that they had not done so and claimed that “HMRC have no jurisdiction on pensions laws and entitlements and the matter cannot be considered by the Commissioners”.  
4.	All I need say of Mr and Mrs Stubbs’ claim is that this appeal is concerned with the taxation of income consisting of pension payments, and quite clearly falls within the jurisdiction of the Special Commissioners.  Mr and Mrs Stubbs having served the necessary notices of appeal, and not having withdrawn them, I consider myself to have jurisdiction.  I therefore propose to deal with the appeals.  
5.	In addition to claiming that they had not appealed to the Special Commissioners, and that the Special Commissioners had no jurisdiction, Mr and Mrs Stubbs also indicated that from choice they would not be attending the hearing of their appeals.  They did so in a telephone conversation with Mrs Barlow, a senior member of the administrative staff, who rang them on 21 August 2007 to enquire who would be attending the hearing on their behalf, and whether they were to be represented.  Having been provided with that information, I determined to hear the appeals in Mr and Mrs Stubbs’ absence.
6.	The underlying facts are that from 9 October 1950 until he retired on 2 October 1992, aged 60, the first appellant, Mr Stubbs, was employed by the Yorkshire Electricity Board as an engineer.  Under the terms and conditions of his employment, he was a member of the Board’s pension scheme, the “Electricity Supply Pension Scheme” (“the Scheme”) – an exempt approved scheme for the purposes of the Income and Corporation Taxes Act 1988.
7.	Mr Stubbs’ membership of the Scheme entitled him to a personal pension for life on retirement, and his wife to a lesser widow’s pension for life should he predecease her.  
8.	From 1992 until 2005, Mr Stubbs’ pension was paid to him and the payer (eventually RWE npower pension team following privatisation of the electricity generating industry) deducted and accounted for tax on it on the basis that it was his personal income, applying coding produced by the Commissioners.  Under section 582 of the Income Tax (Earnings and Pensions) Act 2003, as “the person receiving or entitled to the pension”, he was liable to tax on it.  
9.	In his tax return for the year ended 5 April 2005, signed and dated 11 September 2005, Mr Stubbs disclosed the pension income he received under the Scheme and that he was married to ‘Margaret Stubbs’.  The basic information as to his pension income he returned mirrored that included in all his returns from 1992 onwards.
10.	But in respect of that year, he claimed that one half of the pension paid to him was not his but his wife’s, he having transferred it to her.  Mrs Stubbs in turn claimed in her return that the pension income her husband had transferred or assigned to her was her income and, as her state pension (her only other income) had not absorbed the whole of her personal allowance, she was entitled to a tax repayment equal to the tax she had allegedly overpaid.  Mr and Mrs Stubbs made similar claims in their tax returns for the tax year ended in 2006.  
11.	Rule 40 of the Scheme provided that “Save as permitted by the Pensions Act [1995], benefits payable under the Rules and the entitlement or right thereto cannot be assigned, committed, surrendered or charged and no lien or set-off may be exercised in respect of them”.  Following the enactment of the Welfare Reform and Pensions Act in 1999, the rules of the Scheme were amended to permit the assignment of part or all of a retirement pension or rights to a pension under the Scheme to an ex-spouse to the extent necessary to comply with a pension sharing order, agreement or similar provision.  As Mr and Mrs Stubbs remain married, the amendments to the Scheme made by the 1999 Act do not apply to them.  
12.	Needless to say, the Commissioners did not accept that any transfer of income had taken place, and both amended the self-assessment returns of Mr and Mrs Stubbs, and issued closure notices.  And it is against the Commissioners’ decisions in that behalf that Mr and Mrs Stubbs now appeal.
13.	As I understand it, Mr and Mrs Stubbs claim that since pensions due to divorced people may be ordered (albeit by court order) to be paid partly to one party and partly to the other, equality and fairness demand that they be allowed to apportion Mr Stubbs’ pension between them as indicated in their 2005 and 2006 returns.
14.	These tribunals are a statutory creation and must apply the law as Parliament enacted it; fairness and equality are not matters they can take into consideration in arriving at their decisions.
15.	Applying section 582 of the Income Tax (Earnings and Pensions) Act 2003, I hold that as Mr Stubbs was the person both receiving and entitled to the pension he received, he is liable to income tax on the whole of it.  If follows that the amendments made by HMRC to his self-assessment returns were correct, and his appeal must be dismissed.  It also follows that Mrs Stubbs is not entitled to the repayments which she claimed, that the amendments made to her self-assessment returns were correct, and her appeal must also be dismissed.

DAVID DEMACK
SPECIAL COMMISSIONER
Release Date: 13 September 2007

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