HMRC was essentially arguing that the sons had had a benefit conferred on them if you compared the position at the personal pension with this ‘moment’ between transfers when they had nothing, rather than comparing the two pensions.
This seems remarkably similar to the idea that someone can deprive their estate during a pension transfer by comparing the estate’s value under the new pension with the ‘moment’ between transfers when the benefits return to it, rather than looking at the estate’s value under each of the two pensions.
In relation to conferring benefits, the Court dismissed the return to zero approach as a ‘wholly artificial analysis’ which ‘ignores the reality’ of how pension transfers work.
If this rejection of the return to zero approach can be applied more widely, it seems to follow that in a transfer between two schemes where the administrator has discretion over death benefits, the estate could not be said to lose value, as there is no moment during which the benefits return to it.
This could mean that it is only possible to argue that there has been a disposition at all where the original pension would have paid death benefits to the estate.
It will be fascinating to see whether HMRC amends its guidance following this judgment, and whether any further cases emerge using these rulings as a precedent.
Jessica List is pension technical manager at Curtis Banks