HMRC Appeal On Pension Transfer Prior To Death

A pension scheme transfer just prior to death causes controversy in the Court of Appeal in relation to Inheritance Tax.

HMRC appealed on a case which looks at whether a deceased’s motive of transferring her company pension to a private pension just before her passing was to solely avoid inheritance tax and benefit the beneficiaries.

The appeal came about following the tragic passing of Mrs Rachel Staveley, who died of cancer in December 2006. Prior to her death she transferred her company pension with Morayford Limited (whom she was a Director of and employed by the company and had a large pension fund) to an AXA Personal Pension Plan (APPP).

If the pension had stayed in the company pension scheme, when she died, a lump sum would have been payable to her estate and chargeable to inheritance tax. But following the transfer to the APPP meant the deceased’s two sons were her beneficiaries in relation to death benefit instead. Mrs Staveley also did not take any retirement benefit during her lifetime, meaning, on death, her full pension would be received by her sons free of inheritance tax.

Background to the case

Years ago, Mrs Staveley set up a business with her then husband called Morayford Limited which they were both Directors, however years later in 1996, she instructed solicitors to start divorce proceedings which was completed in January 2000. It was a hostile separation which left her with bitter feelings towards her husband which led her to think long and hard about her financial stability and future security.

It transpired through the courts that the deceased’s sole motive for the transfer was to make sure that any part of her pension would not revert back to the company (Morayford Limted) and in turn benefit her ex-husband. And the transfer was not “intended to confer a gratuitous benefit on her sons”.

Read more on the case here.

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