FA 2010 comment: Retrospection is always dangerous

This year's rushed Finance Act contains several retrospective and retroactive elements. Explicit retrospection is always dangerous but damage can also be delivered in more subtle ways — as exemplified by the new pensions rules and the bank payroll tax.

Avoidance

The Finance Act contains several anti-avoidance measures which are backdated to the date of the blocking announcement. For example changes to the sale of lessors take effect from 9 December 2009 when draft legislation was published. The problem is that the Finance Act doesn't mirror this draft legislation. Instead it has been changed so that it 'operates fairly and [so] that the full amount of tax will be collected on the profits of the leasing business following the sale' (Budget Note 14); it therefore contains retrospective elements.

Pensions tax relief

Retrospection in the context of structured avoidance can arguably be justified. I was more worried by the...