The Special Commissioner has held that an attempt by the trustee and only remaining scheme member of a small self-administered pension scheme to take all remaining scheme assets as a tax-free lump sum and to wind up the scheme should attract a double tax charge.

Thorpe claimed that he had the right to wind up the scheme in reliance on the 1841 case of Saunders v Vautier and to pay all the assets of the scheme to himself tax-free. Under the rule in Saunders v Vautier, beneficiaries of a trust may wind it up and share out the assets provided all the possible beneficiaries are adults of sound mind and they all agree to this. However, the Special Commissioner pointed out that the principle in Saunders v Vautier could not be applied if there were any potential beneficiaries, even if not yet in existence, who had not consented. The Special Commissioner held that as there were other potential beneficiaries of the scheme (such as a widow or child of a beneficiary), Thorpe was not the sole remaining potential beneficiary and so could not cause the trust to be wound up. He was therefore liable to tax on the amounts paid to him from the scheme.

Moreover, the Special Commissioner found that Thorpe was not permitted by the rule in Re Hastings-Bass to rectify his error by treating the payment as having never been made, since the principle in that case does not provide relief from the consequences of the act of a beneficiary.

View the decision.