UK/EU - Lawyers warn that the Inland Revenue must prepare for a backlash from pension schemes for failing to tax early retirement benefits in accordance with a landmark EU ruling.
The ECJ ruling on Beckmann v Dynamco – which states that when an employee is transferred to another company and then made redundant, their transferred pension benefits should be treated as redundancy benefits – is being ignored by the Revenue.
Simmons & Simmons solicitor Camilla Barry warned that if the Revenue maintains its stance then a backlash from pension scheme members is sure to follow.
Hammond Suddards Edge partner Wendy Hunter said that if the ECJ is right and pension benefits under TUPE are considered as redundancy benefits, then there could be a dispute between the employer and employee.
Both the employer and employee could argue that they should gain the benefits of the tax relief, Hunter added.
But redundancy benefits, which includes the first £30,000 as tax free, will continue to be treated as pension benefits for tax purposes, a Revenue spokesman confirmed.
The issue predominantly affects employees transferred from local government jobs to private sector roles who are then made redundant.
• Public sector workers union Unison said it has been “inundated” with calls about the issue and has set up a helpline number to deal with it.
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