I am aware that the case of Equity Trust (Singapore) Limited v HMRC has been a subject of considerable interest. The matter was heard by the High Court on 20 May. Equity Trust established a Qualifying Recognised Overseas Pension Scheme (QROPS), having received approval from HMRC in 2006. The QROPS approval was withdrawn retrospectively by HMRC in 2008 on the grounds that the pension scheme was not open to Singapore residents, and that it was not approved, recognised or registered with Singapore tax authorities.
Equity Trust pointed to the Trust Deed which expressly provided that the pension scheme was open to Singapore residents; they also obtained expert advice in Singapore that it was open to Singapore residents. As a matter of fact, the scheme had members who were Singapore residents. Equity Trust felt that on balance you could probably say that it was open to Singapore residents.
Definitely not, said HMRC – it was not really open to Singapore residents. One of their reasons was that the trustees had wide discretionary powers. Those powers could be exercised to exclude Singapore residents. They had not been exercised but they could be. The Judge agreed.
I dare say there are lots of QROPS which have wide discretionary powers which could be used in this way (in fact I expect they all have) and I guess there will be some urgent examination of trust deeds.
The second argument was that the scheme was not approved, recognised or registered as a pension scheme with the Singapore tax authorities. This was Condition A in the QROPS regulations. Quite right – it wasn’t. The system in Singapore does not cover personal pension schemes, so it could not possibly do so. However, that is what Condition B is for. Condition B applies where there is no system for approving, recognising or registering such schemes, in which case there are some conventional conditions, all of which were satisfied. Not good enough, said HMRC. Singapore did recognise some occupational pension schemes which meant that Equity Trust were stuck. They could not get recognition for their scheme because Singapore does not recognise personal pension schemes, but they were precluded from Condition B because there was a system for recognising something – no matter how irrelevant.
The court found for HMRC, but in giving permission to Equity Trust to appeal, the Judge explained that he was not sufficiently confident in the correctness of his judgment so that an appeal had a real prospect of success. Never seen that before – and we will see what the Court of Appeal have to say about it.