In a precedent-setting decision, Inland Revenue Special Commissioners found in favour of the software trader Omega’s group pension scheme allowing the software house to hold onto almost Pounds 100,000 of tax credits gained in a share buy-back dating back to 1996.
This could mean the Revenue, which, is currently seeking Pounds 200m from more than one hundred other pension schemes, could lose the right to reclaim the money.
The Revenue is set to appeal the ruling, but Steve Roth, a tax partner at KPMG, said he was hopeful the High Court would reach the same decision as special commissioners.
If this happens, ‘many other cases will then almost certainly be dropped,’ Roth added.
The Omega case dates back to May and June 1996, when gas company Powergen bought back shares it had sold to the company’s pension scheme, valued at the time at just under Pounds 484,000.
The Revenue took the view that Omega had received an abnormal amount by way of dividend and had obtained a tax advantage from the buy-back.
However, special commissioners Brice and Cornwell-Kelly disagreed with the Revenue on both counts saying that the rate of return obtained by Omega did not exceed a normal return. The commissioners also took into account that the fund had disposed of the whole capital value of the asset.
A Revenue spokesperson told AccountancyAge.com: ‘The question of whether Omega’s Group Pension scheme obtained an abnormal amount by way of dividend was one of a number of issues the special commissioners considered.’
‘The commissioners also found that when the fund sold the shares , it was done with a main purpose of obtaining a tax advantage,’ he added.
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