Pensioners face £200m tax gamble

The row has erupted following a landmark decision last week over the tax treatment of a series of share buybacks by companies between September 1994 and October 1996.

Despite losing the judgment, the Revenue is still trying to claw back the resulting tax credits gained by the pension funds who owned bought-back shares before an appeal is heard. Tax experts say around Pounds 200m is at stake.

Pension funds that benefited from the schemes now face the choice of settling the long-running dispute or having to pay back the credits in full if the appeal by the taxman is successful.

The Inland Revenue Special Commissioners’ decision related to two share buybacks in 1996 by utility giant Powergen from the pension fund of Omega.But it has now emerged that the Revenue, which is appealing against the decision, has

told pension fund trustees they could reach a settlement now to avoid paying back the full amount if the appeal goes in the Revenue’s favour. ‘This places trustees in a very difficult position,’ said one source close to the case.

If the appeal failed, the pension funds would not be required to return tax credits, and other funds which had settled prior to the judgement could be able to re-negotiate with the Revenue. ‘In some cases you are talking about seven-figure amounts,’ said Paul Lynam, tax director at KPMG. ‘Trustees will need to decide what to do with their pensioners’ money,’ he added.

A Revenue spokesperson denied the investigators were putting pension fund trustees under pressure to settle.


Revenue faces defeat in tax fight

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