UT (Tax & Chancery) UT/2023/000103 - [2025] UKUT 00102 (TCC)

We do not accept the submissions set out above. We instead agree with the FTT and with the submissions made by Ms Poots in the hearing, which are incorporated in our reasons below.

Our starting point is that s 239 provides (our emphasis):

“(1)

A charge to income tax, to be known as the scheme sanction charge, arises where in any tax year one or more scheme chargeable payments are made by a registered pension scheme.

(2)

The person liable to the scheme sanction charge is the scheme administrator.”

The term “scheme chargeable payment” is defined at s 241(1) to include “an unauthorised payment by the pension scheme”. Thus, the administrator’s liability to the charge arises in the year when the unauthorised payment is made.

Section 268(5) then provides that the administrator may “apply to the Inland Revenue for the discharge of the scheme administrator's liability to the scheme sanction charge”. The application is therefore to discharge the liability.

It is well established that there is a difference between a liability to tax, its assessment and its payment. In Whitney v IRC [1926] AC 37 at 52, Lord Dunedin said:

“There are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay.”

Paragraph 3 of the Discharge Regs provides that the application for discharge must be made “not later than six years after the end of the accounting period to which it relates”. The word “it” can only refer to the liability, because the administrator is asking to be discharged from the liability, not for the assessment to be cancelled.

We also agree with Ms Poots that the Discharge Regs are carefully drafted to fit with the TMA time limit provisions. Under that legislation, HMRC must issue the assessment within the ordinary time limit of four years, unless there is careless or deliberate behaviour on the part of the administrator. Thus, even where an assessment is issued at the end of that four year period, the administrator will have a further two years to make the discharge application. If HMRC issue an assessment in reliance on the longer time limits in TMA s 36, Reg 3(2) of the Discharge Regs provides that the administrator has two years from the date of that assessment. Thus, in either case, there is at least two years within which the application can be made.

We reject Mr Simpson’s suggestion that a time limit of at least two years is in some way unfair to an administrator. Taxpayers issued with income or capital gains assessments have 30 days to accept the offer of a statutory review, and 30 days from the date of that review to notify the appeal to the Tribunal, see TMA s 49C, 49G and 49H.

He also submitted that “as a matter of general policy, time limits should not run when the person to whom they apply has no knowledge that they are running”. We do not recognise the policy to which he refers. It is in the nature of statutory time limits that they apply whether or not a person is aware of them.

In addition, Mr Simpson referred to the fact that the assessments do not include information about making a discharge application, but what HMRC include in their assessments and/or any related letters is irrelevant to the statutory construction of the provisions.

Finally, he is unlikely to be correct that HMRC have no powers to extend the time limits set out in the Discharge Regs: in R (oao Ames) v HMRC [2018] UKUT 190 TCC it was common ground that HMRC had an unfettered discretion to admit a late claim for EIS relief under their care and management responsibilities in s 5(1) of the Commissioners for Revenue and Customs Act 2005, and we can see no reason why the position would be different in the case of a late application to discharge an administrator from liability to the scheme sanction charge.

We thus dismiss Ground 5.