Pension funds win £200m victory
The UK pensions industry is celebrating a £200m victory after the Inland Revenue lost the last round of a prolonged legal battle with two of the country's largest pension funds.
The appeal committee of the House of Lords this week rejected the Revenue’s petition to appeal a Court of Appeal judgement over the taxation of the ‘sub-underwriting’ activities of the British Telecom and Post Office pension funds.
Pension funds sub-underwrite by guaranteeing they will buy shares when companies have rights issues in return for a commission.
The Revenue has argued throughout the legal fight, which was first heard before the Special Commissioners of the Inland Revenue in 1997, that these activities constituted trading and the commissions should therefore be taxed.
The pension funds argued the activities where an integral part of their investment activities and therefore exempt from tax.
Deloitte & Touche acted as advisers on the case, which, had it gone the other way, could have cost pension funds around £200m.