In Bayonet Ventures LLP and R K Howard v HMRC  TC06493 a loan made by the Bayonet Ventures Pension scheme to the LLP was held not to be a loan to the LLP members and not an unauthorised member payment from the scheme.
Where a pension scheme makes an unauthorised payment to a scheme member or sponsoring employer tax charges can arise including an Unauthorised payment charge of 40% and potential unauthorised payment surcharges of 15%.
Under s863 ITTOIA 2005, for income tax purposes:
- If a limited liability partnership (LLP) carries on a trade, profession or business with a view to profit
- All the activities of the LLP are treated as carried on in partnership by its members (and not by the LLP)
- Anything done by, to or in relation to LLP for the purposes of, or in connection with, any of its activities is treated as done by, to or in relation to the members as partners.
In 2009 Bayonet Ventures Pension Scheme made a loan of £66,000 to Bayonet Ventures LLP:
- For the year in question the LLP was was dormant.
- HMRC opened an enquiry into the pension scheme 2009/10 tax return and asserted that under s863 the loan to the LLP was to be treated as a loan to the partners of the LLP.
- HMRC assessed the LLP partners to an unauthorised payment charge and surcharge, and one of the partners, R K Howard, to a scheme sanction charge as deemed scheme administrator.
- The LLP and Mr Howard appealed.
The First Tier tribunal (FTT) in allowing the appeal and discharging all of the assessments held:
- The scheme sanction charge must be dismissed as the partner assessed was not in fact the scheme administrator and HMRC did not have the power to appoint him as such. It should have been addressed to the administrator and not the partner by name.
- S863 applies where an LLP is carrying on a trade, profession or business and there was no reason to depart from a literal interpretation of this; Bayonet Ventures was dormant during 2009/10 and the loan did not change this. S863 did not apply and the loan could not be treated as a loan to the LLP partners.
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