The Ark schemes: unauthorised payment charges upheld by FTT

The latest instalment in the saga of the Ark pension schemes has reached the First-Tier Tax Tribunal. These schemes were vehicles for a form of pensions liberation called a “pension reciprocation plan”, which involved reciprocal loans between members of unconnected occupational schemes. In 2011, the High Court in Dalriada Trustees Ltd v Faulds [2011] EWHC 3391 (Ch) held that those loans constituted unauthorised member payments, and HMRC duly assessed the members for unauthorised payments charges and surcharges, and the scheme administrator for scheme sanction charges. After HMRC refused applications to discharge those charges, two of the members and the scheme administrator appealed to the Tribunal – as long ago as 2016. After a 10-day hearing involving extensive witness evidence, the Tribunal has now dismissed the appeals, with tax consequences that are, in the Tribunal’s words, “disastrous for every member”. This is unlikely to be the end of the road, however. Permission to appeal to the Upper Tribunal is likely to be sought; and other members, whose appeals were stayed pending the outcome of this case, may have different arguments based on their own particular circumstances: Dalriada Trustees Ltd v Revenue and Customs Commissioners [2023] UKFTT 314 (TC). The full judgment can be accessed here.