HMRC loses tribunal appeal over controversial pension transfer IHT rule

In February 3, 2017
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The future of a controversial rule that subjects some pension transfers to hefty inheritance tax charges has been called into question, after the Upper Tribunal rejected an appeal by HM Customs & Revenue.

The case in question involved a woman who, following an acrimonious divorce transferred a portion of a pension she had set up with her husband into a new personal pension.

A few weeks after making the transfer, the woman died.

Because the woman was terminally ill, HMRC treated the transfer as a “chargeable lifetime transfer” and applied inheritance tax.

The woman’s estate challenged HMRC and won. HMRC appealed and lost.

The court ruled that any IHT advantage gained from the transfer was “not intended to confer gratuitous benefit”, and therefore rejected HMRC’s appeal.

This is great news for clients who make legitimate changes to their pension arrangements, not to deliberately avoid inheritance tax, but to make sure their money goes to the right people upon their deaths. But this does also highlight the problem with leaving things too late. Had the woman not left transferring the pension and organising her affairs until she was terminally ill, HMRC would have never even been able to challenge this case, which undoubtedly cost the family money and stress, at a point when they should have been grieving.

Jasmine has been a qualified Financial Planner since 2008. She has also been a member of the Society of Will Writers since 2012. She is passionate about helping Clients build their wealth and achieve the financial lifestyle they desire. Her areas of expertise are that of Savings, Investments, Pensions and Retirement Planning.

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