Mr Selby said: “After years of wrangling in the courts this ruling finally brings some certainty to people who transfer their pensions while in ill-health.
"If the Court of Appeal ruling from 2018 had been upheld then DC pension transfers would have been at risk of being hit with a tax charge where the member dies within two years even where the primary motivation was to change provider or lower annual charges.
“This protracted case has exposed the complexity and confusion that exists around pensions and IHT. Research has exposed a gaping lack of understanding when it comes to gifting and IHT, and this is even more pronounced when pensions are thrown into the mix.
“It is within the gift of politicians to address this confusion and the common sense solution to this complexity would be to remove pensions from IHT altogether.”
Jessica List, pension technical manager at Curtis Banks, said the ruling will set a precedent on ill-health transfers going forward.
Ms List said: "The judgments have changed at every stage, and even in this final ruling the judges were not in complete agreement, showing what a highly contentious issue this has been.
"It’s hugely reassuring for the industry that the transfer itself has been found not to create an IHT liability, for reasons which would seem to set a precedent for other similar cases."
In May 2014 the First Tier Tribunal found against HMRC, saying it was satisfied that in making the transfer Ms Staveley had not had any intention to confer a gratuitous benefit.
However, it also held that by Ms Staveley failing to take lifetime pension benefits her estate had been diminished and the estates of her sons (to whom the death benefits were subsequently paid by the pension scheme administrators) had been increased.
Both parties appealed the judgment, and in January 2017 the Upper Tribunal dismissed HMRC’s appeal and allowed the taxpayer’s appeal.
It ruled that although Ms Staveley’s unaccessed pension had been the source of the funds which were paid to the sons, it was the action of the pension administrator which had been the effective cause of the increase in their estates.
In June 2018, the Court of Appeal reversed both elements of the Upper Tribunal’s decision.
The Court of Appeal accepted HMRC’s argument that the pension transfer was an "associated operation" and was therefore taxable.
It also ruled that there was enough of a link between the fact that Ms Staveley didn’t access her funds and the increase in her son’s estates.
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