In Elaine Curtis v HMRC [2022] TC 8499, the First Tier Tribunal (FTT) ruled that while a loan received was related to a pension transfer and represented an Unauthorised Member Payment, HMRC had not raised a valid discovery assessment to collect the resulting tax.

  • Mrs Curtis was recommended to a financial adviser who arranged for her a loan of £20,000.
  • He also recommended she move her private pension to an alternative provider, which she did without realising that it had a connection with the loan she was to receive.
  • The arrangements ultimately resulted in Mrs Curtis losing her pension in exchange for relieving some of the personal loan that she had borrowed.
  • Following a nudge letter, Mrs Curtis filed a tax return omitting what HMRC believed was an Unauthorised Member Payment tax charge.
  • While in time to issue an enquiry under s.9A, a Discovery Assessment was issued in February 2017.
  • Following an unsuccessful Statutory Review, Mrs Curtis Appealed to the FTT.

The FTT found that:

  • The loan was an unauthorised member payment as:
    • There was a link between the movement of the pension and the loan Mrs Curtis received as funds were paid from the new pension provider to the company making her the loan.
    • That Mrs Curtis was unaware this was the case did not prevent there being an unauthorised member payment.
  • HMRC were not entitled to make discovery assessments as:
    • Mrs Curtis had not acted carelessly. Carelessness had not brought about the loss of tax as:
      • There was no reason for her to know or suspect there was a connection between the loan and the movement of her pension.
      • Failing to research the position, contact HMRC or a professional when receiving a nudge letter from HMRC was not careless, she did not have access to the information which HMRC had. There was no way she could reasonably obtain that information (HMRC would be unlikely to provide it and she received no response from the financial advisor).
  • HMRC had used the wrong powers: a discovery assessment was made prior to the enquiry window had closed meant it was not valid as:
      • HMRC can only make a discovery assessment after the enquiry window had been closed.
      • Ms Curtis appealed the discovery assessment prior to the closure of the enquiry window meaning if the appeal had been determined at that time the discovery assessment would have been invalid.
      • It was illogical that an assessment could be invalid when issued but become validated at a later date.
  • If it was necessary to consider, it was not just and reasonable to raise unauthorised payments charges to Mrs Curtis as:
    • There was nothing more that Mrs Curtis might have been reasonably been expected to do that would have avoided the unauthorised member payment.
    • She obtained advice from someone she thought was an independent financial advisor, it appeared she had been the unfortunate victim of a scam.
    • That the financial adviser obtained a commission from the transaction did not mean the advice was not independent.

The appeal was allowed.

Useful guides on this topic

Pensions: Unauthorised payment charges
What is a pension unauthorised payment? When does a tax charge arise? Who pays the charge? 

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Statutory Review (by HMRC)
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review?

When the tax inspector calls
This section looks at policy on tax strategies/avoidance and tax investigation news, including serious fraud and disclosure facilities. From time to time we comment on any other topical HMRC activity.

External links

Elaine Curtis v HMRC [2022] TC 8499

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