Substitution payment

Substitution payment

Before 1998 the appellant bank provided through its wholly-owned subsidiary BPTS free help in completing tax returns for pensioners and their spouses. The bank decided to sell BPTS and made compensation payments on a sliding scale according to how much they had made of the service to the pensioners. HMRC said that tax was due on the payments on the grounds that they were benefits provided under a non-approved retirement benefits scheme within TA 1988 s 596A. The Special Commissioner allowed the taxpayer's appeal saying that the payments had not been made in connection with the pensioners' past service as the bank's employees within s 612.
HMRC appealed.
Mr Justice Richards in the High Court ruled that the Special Commissioner had misconstrued s 612(1) and therefore made an error in law. The tax service had been offered to retired employees and their...