Treasury 'unjustly' retained pension cash
The government could face a bill of more than £100m after a High Court ruling allowed 19 pension funds to pursue cash they claim the Treasury has 'unjustly' retained.
Link: ‘Treasury to understate pension liability by billions’
The first blow was struck this week, when the chief chancery gave the go-ahead for a group litigation order on foreign income dividends.
The GLO is being spearheaded by the UK’s largest fund, the BT Pension Scheme. The British Coal and University Superannuation funds are also involved.
Accountancy Age first revealed the case earlier this year, when just 14 funds were involved.
‘The UK government has been unjustly holding on to money that is not rightfully theirs,’ said Mark Whitehouse of City law firm, McGrigors, which is handling the case for KPMG.
He said that all 19 pension funds felt they owed it to investors to investigate the possibility of compensation.
Chris Morgan, head of the EU tax department at KPMG, said he felt the pension funds’ chances were ‘very good’ and that the Revenue should agree to go to the European Court of Justice to keep costs and time delays to a minimum. He was hopeful that other funds would join now that the GLO will go ahead.
The case is further evidence of the growing power of the European Commission in domestic tax affairs. It is the sixth GLO now in progress, with the total potential deficit to UK coffers estimated to be more than £2bn.
Earlier this month the EC demanded that the UK government amend its pensions tax legislation to make it legal under EC law. The commission claimed the government had not provided enough information on how it would tackle the ‘beneficial tax treatment of domestic schemes’ and warned it would refer the UK to the ECJ if it did not amend its legislation.
The so-called ‘foreign income dividend’ case rests on tax relief the funds should have received on dividends from overseas investments between 1994 and 1997. The Inland Revenue refused to comment.