REVENUE — Income tax — Assessment — Employer placing shares in employee’s retirement benefit scheme — Whether “payment of a sum” — Whether creating a charge to tax — Income and Corporation Taxes Act 1988 (c 1), s 595(1)

Irving v Revenue and Customs Commissioners [2007] EWCA Civ 6; [2008] WLR (D) 9

CA: Sedley, Maurice Kay and Rimer LJJ: 25 January 2008

An employer who placed shares in an employee’s retirement benefit scheme was to be treated as having “paid a sum” into the scheme for the purposes of s 595(1) of the Income and Corporation Taxes Act 1988 (since repealed), rendering the employee liable to income tax on the value of the shares.

The Court of Appeal so held dismissing an appeal by the taxpayer, John Leslie Irving, from an order of Blackburne J on 8 February 2007 dismissing his appeal against a decision of the Special Commissioners (John Walters QC and Howard Nolan) dated 23 March 2006 upholding an amendment to his self-assessment to income tax for the year 1996/1997 increasing his tax liability £145,051.

S 595(1) of the 1988 Act provided: “ where, pursuant to a retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for any employee of that employer, then ... (a) the sum paid, if not otherwise chargeable to income tax as income of the employee, shall be deemed ... to be income of that employee ... and assessable to tax...”

RIMER LJ said that the taxpayer was a director of Lonsdale Business Forms Ltd and a trustee of its unapproved retirement benefits scheme. The directors recommended the transfer of some £145,000-worth of shares into the scheme. The taxpayer maintained that s 595(1) did not apply, since the natural meaning of “pays a sum” was to pay a sum of money and the words did not embrace contributions in kind. The taxpayer accepted that there would be a charge to tax on the benefits later paid out of the scheme. Though the 1988 Act was no longer current there were more than 50 other cases raising a like issue. Agreeing on the natural meaning of the words his Lordship said that none the less the context in which the phrase was used compelled the conclusion that Parliament intended it to have a wider meaning.

MAURICE KAY LJ and SEDLEY LJ agreed.

Appearances: David Goy QC and Michael Sherry (DMH Stallard) for the taxpayer; Philip Jones QC (Revenue and Customs Solicitor’s Office) for the Revenue

Reported by: John Spencer, barrister