This is still very much something which could affect current clients, as HMRC’s IHT409 form asks for details of any pension transfers which took place within two years of death.
The Supreme Court’s final decision is what the appellants and industry have hoped for. From the industry’s perspective, it also provides clarity over some areas of concern raised in previous rulings.
The arguments here primarily focus on whether another exemption in the IHT Act (Section 10) applies. Section 10 states:
“A disposition is not a transfer of value if it is shown that it was not intended, and was not made in a transaction intended, to confer any gratuitous benefit on any person…”
The legislation also states that the term ‘transaction’ can also refer to a series of transactions and ‘associated operations’.
Therefore the Court considered two questions: whether the transfer in isolation was intended to confer a gratuitous benefit, and also whether the transfer could be considered along with the omission to take benefits as a series of transactions intended to confer a benefit.
It was generally accepted that Mrs Staveley’s reason for not accessing her pension was an intention to confer the benefits on her sons.
The Court of Appeal, in its previous judgment, had said that the transfer and omission could be linked and considered together.
This left the concerning question of how far it was possible to go to link actions together in a series.
It was also unclear whether omitting to take benefits could still be seen as an associated operation in a contemporary case, given the aforementioned exemption from 2011.
The Supreme Court helped clear this up, by ruling that the individual elements of a series of transactions or associated operations must be linked by a common intent or motive.
The Court’s view was that if Mrs Staveley had needed to complete the transfer so that she could omit to take benefits in order to confer them on her sons, then the transactions could be considered together.
However, as neither action affected the other, they could not be considered a series of transactions or associated operations.
It is worth noting that the judges were not in complete agreement on this point; two would have argued that it is only necessary for each element to be a ‘contributory part’ of an overall scheme. However, it is still reassuring that the majority argued for a limit on the scope of this definition.
When looking at the transfer in isolation, the previous rulings showed some general agreement that Mrs Staveley’s sons had had a benefit conferred on them.
They were in a materially better position, as the death benefits from the personal pension were not subject to IHT as the benefits from the section 32 policy (via the will) would have been.