TMF Trustees Singapore Ltd v HM Revenue and Customs

For an overseas pension scheme to satisfy Condition B, the phrase no system exists means that the foreign country has no system at all for approving, recognising or registering any pension scheme for tax purposes. It does not mean that no system applies to the particular type of scheme concerned. A statutory approval power may constitute such a system even if it is infrequently used, lacks published parameters and applies only to a limited class of schemes. Whether a scheme is open to local residents is assessed by practical accessibility, having regard to its documents, tax representations, marketing material and membership evidence. The appeal was dismissed because Singapore had an operative approval system under the Singapore Income Tax Act 1948, and the scheme was not in practical terms accessible to Singapore residents.

The claimant, trustee of a Singapore pension scheme known as ROSIIP, challenged HMRC’s withdrawal of its acceptance that the scheme was a qualifying recognised overseas pension scheme under the Finance Act 2004 and the 2006 regulations.

The High Court held that ROSIIP failed Condition B because Singapore had a tax-approval system under section 5 of the Singapore Income Tax Act 1948. It also held that the scheme was not open to Singapore residents, so Primary Condition 1 was not satisfied. The central issues on appeal were the proper construction of Condition B, whether section 5 created a relevant system, and whether ROSIIP was open to Singapore residents.

Lloyd LJ, with Rimer and Jackson LJJ agreeing, dismissed the appeal. ROSIIP failed the statutory requirements on both grounds considered by the court.

1. Under regulation 2(3) of the 2006 regulations, a scheme must satisfy both Primary Conditions and one of Conditions A or B. Condition B is available only where no system exists for the approval, recognition or registration of pension schemes for tax purposes.
2. The phrase no system exists is not confined to the absence of a system applicable to the particular kind of scheme under consideration. Nor does it require a system covering every possible pension scheme. The existence of a system covering one class, such as occupational pension schemes, prevents reliance on Condition B by a scheme outside that class. The court rejected the proposed type-specific interpretation.
3. Section 5 of the Singapore Income Tax Act 1948, permitting the Comptroller to approve pension or provident funds subject to conditions and to withdraw approval, constituted a system. Its infrequent use, the absence of published parameters and the limited number of recent approvals did not alter that conclusion. The possibility of judicial control of the Comptroller’s discretion was further support. The later IRAS Tax Guide could be admitted, but additional legal opinion and a KPMG press release were rejected.
4. Primary Condition 1 was also not satisfied. Whether ROSIIP was open to Singapore residents was a factual question. The judge was entitled to infer from the foreign-trust tax representations, marketing material, operational checklist and limited membership evidence that Singapore residents were not practically accessible to the scheme, notwithstanding the trust deed’s wording and the Singapore addresses given by six members. The inference was not clearly wrong.
5. The court left undecided whether an occupational scheme approved under section 5 could qualify as a QROPS, since that hypothetical issue did not affect the appeal. The appeal was dismissed.

• Court of Appeal (Civil Division): The appeal was dismissed on both grounds. [2012] EWCA Civ 192
• High Court of Justice, Chancery Division: His Honour Judge Hodge Q.C. held that ROSIIP failed two conditions in the 2006 regulations and was not a qualifying recognised overseas pension scheme. [2011] EWHC 1463 (Ch)