Schemes take gamble on outcome of tax test case
A key test case which is expected to settle whether pension funds
should pay tax on share underwriting will be heard by the Court of Appeal in
February - too late to help the 50,000-plus pension schemes currently going
through tax self-assessment.
The case, which has pitted the Inland Revenue against British
Telecommunications (BT) and the Post Office, is expected to settle whether
sub-underwriting of share issues can be counted as trading and therefore liable
for tax.
Mr Justice Lightman surprised legal experts last year by backing the
Revenue's case in the High
Court, landing the schemes with a £13m tax bill (PW 19.10.98).
It is believed that UK schemes will face demands of at least
£200m if the decision is upheld.
The Court of Appeal will now hear the case on 8-10 February with a
decision expected to be handed down around April.
The timing of the hearing presents a dilemma for schemes going through
tax self-assessment, who have a matter of days to declare whether they have a
tax liability on their sub-under-writing or claim an exemption and risk a fine.
All schemes with a financial year-end of April 1999 must return their
assessment by 31 January 2000 but the Revenue has warned schemes to declare any
tax liabilities by October.
Clive Cutbill, partner at solicitors Herbert Smith, said the case is
putting schemes in a difficult position as they have to decide whether to pay
tax on an unresolved issue.
"You have to make a decision on whether you have a tax liability or
not," he commented. "It means that you have to decide whether you have got it
right or the Inland Revenue have got it right."
Cohn Hartridge-Price, pensions head at BT said the schemes, which
originally had their case upheld by the UK's top tax tribunal, believe they
have a strong case.
He commented. "We have won one, lost one. We certainly would not be
pursuing this unless we thought we had a good case."
Green guidance for pension schemes
Online voting agency Manifest has linked up with specialist consultancy
Environmental Governance (EG) to launch a support service for pension schemes
which implement socially responsible investment (SR).
The service, dubbed Green Card, will provide institutional investors
with policy support and analysis of the environmental impact of their
investment portfolio.
Green Card, which will launch next month, is the latest response to
upcoming regulations requiring all pension schemes to include their policy on
SRI.
Commenting on the move, Manifest managing director Sarah Wilson, said:
"There is mounting evidence to suggest that there is a link between good
environmental performance and enhanced company profitability and that a strong
environmental record is the sign of a well-managed company""
Alex Novarese, Pensions Week
20 September, 1999
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