Tax win for pensions.

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. A House of Lords committee last 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 Revenue in 1997, that these activities constituted trading, therefore the commissions should be taxed. The pension funds argued the activities were an integral part of their investment activities, so 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. George Ritchie, tax partner at Deloittes, said: ‘This decision is excellent news for pension schemes, which are in a similar position to the BT and Post Office schemes.’ He added: ‘The trustees of the BT pension scheme and the directors of the Post Office Pensions Trustees Ltd always believed this income was exempt and the courts have upheld their views. I am sure other pension schemes will be carefully considering the outcome of this case.’ Hermes Pensions Management co-ordinated the case on behalf of the schemes and were this week celebrating an end to the hearings. Tony Watson, chief investment officer, said: ‘We are delighted the decision by the trustees of the BT pension scheme and the directors of Post Office Pension Trustees to take this matter through the Courts has been vindicated and that our confident assertion that the schemes were not trading has been upheld.’ More on this story

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