James S Moffat v Her Majesty's Revenue & Customs

Facts

The appellant, James S Moffat, was a former employee of Fife Scottish Omnibuses Limited, a subsidiary of Scottish Bus Group Limited, and a member of the Scottish Transport Group Pension Fund. Following the enactment of the Transport (Scotland) Act 1989, Scottish Bus Group Limited was privatised and its occupational pension schemes fell to be wound up, leaving a substantial surplus which, after tax, amounted to some £176 million and which was ultimately paid to the UK Treasury. The Treasury accepted the surplus on the understanding that a large part of it would be repaid, on an ex gratia basis, to former scheme members, mirroring the position of National Bus Company pensioners in England and Wales, whose surpluses had been the subject of litigation and a court-approved settlement. Scottish ministers and HM Treasury agreed that funds — eventually £126 million — should be distributed by way of ex gratia payments. The appellant claimed and received such a payment on 6 September 2002, from which basic rate income tax was deducted at source. He referred to the payment in Box 23.5, "Additional information", of his 2002-03 self-assessment return, stating that in his view it was not taxable and seeking repayment. The Revenue opened an enquiry on the footing that the payment had not been included, closed it and amended the return. He appealed against both the closure and the amendment.