Our Ref: LGR 79/1/1284 396 index
SUPERANNUATION ACT 1972
LOCAL GOVERNMENT SUPERANNUATION REGULATIONS 1974 (The 1974 regulations)
LOCAL GOVERNMENT SUPERANNUATION REGULATIONS 1986 (the 1986 regulations)
1. I am directed by the Secretary of State for the Environment, Transport and the Regions to refer to your notice of appeal submitted under regulation N8 of the 1986 regulations against the decision of XXX County Council or XXX County Borough Council, who now administer your pension, about the superannuability of certain payments made to you.
2. The appeal has been conducted by correspondence. Consideration has been given to your letters 18 August and 3 October 1994, 5 June 1995, 1 August, 12 and 28 October and 27 December 1996, 6 May and 29 August 1997, 10 and 17 January 1998; the Council's letters of 24 October 1994, 10 September and 23 October 1996, and 5 January 1998; and to all copy documents enclosed with those letters.
3. The Secretary of State takes the view that the question for determination is whether your annual car allowance met the definition of remuneration in the 1974 regulations.
4. From the evidence submitted the following facts have been established:
(a) you were a local government employee and member of the local government superannuation scheme (the LGSS) up to your retirement on 31 July 1982;
(b) following local government re-organisation you were appointed chief executive of XXX Borough Council (XXX BC) from 1 April 1974;
(c) from 1974 to 1982 you received an annual lump sum car allowance in line with a decision of XXX BC taken in 1974;
(d) XXX BC decided that the car allowance was not superannuable; and
(e) following your original appeal in August 1994 a determination was issued on 18 July 1995 which dismissed your appeal.
5. Subsequent to the determination being issued you sought leave to appeal to the High Court, for a judicial review of this decision. In your submission to the court you contended inter alia that the interests of natural justice had not been observed since certain documentation on which the decision was based was not copied to you and that the allowance you received was not in fact an essential user allowance, although in the determination the Secretary of State had found that it was. These points were accepted and supported on behalf of the Secretary of State. As a result no appeal hearing was completed but the determination of 18 July 1995 was set aside and the case was required to be dealt with afresh.
6. As part of your submission, you have put forward further arguments to support your case and have produced a copy of a letter dated 28th February 1983 from XXX BC to the Inland Revenue which states that the lump sum car allowances were regarded by XXX BC as part of the employees salary and were taxable. The arguments in the addendum submission refer to-
(a) the fact that the car allowance was an annual lump sum and not linked to mileage;
(b) the permanence of the payment and that it was for the employee's use, not being a reimbursement of expenses incurred;
(c) the taxation treatment and the acknowledgment of XXX BC that they treated such payments as part of the employees salary;
(d) the [council] decision with emphasis on the facts that under the *** scheme, the employee had to have a car (in contradiction to the point made by counsel for the Secretary of State in the skeleton argument) and that there was no linkage to miles travelled on council business which you contend is the same as the scheme operated by XXX BC;
(e) the need for decisions of the Secretary of State on appeal to be based on materially the same facts not to be contradictory and arbitrary.
7. In response to the draft determination issued to you and the Council on 16 December 1997, you make a number of observations in your letter of 10 January 1998. These have been carefully considered together with your contention summarised in paragraph 6 above and all other representations and evidence submitted. The Secretary of State is required to determine the same question as to your rights under the regulations which fell to be decided in the first instance by the Council. He is acting judicially and has no power to modify the application of the regulations to the facts of the case.
8. From when you were appointed chief executive of XXX BC until you retired the provisions of the 1974 regulations applied to your pensionable service. As far as is relevant to your appeal these regulations defined remuneration as follows:
AA3.-(1) ...
remuneration means all salary, wages, fees, and poundage and other payments paid or made to an employee as such for his own use, and includes the money value of any apartments, rations or other allowances in kind appertaining to his employment, but does not include-
(a) or (b) ...
(c) any travelling or subsistence allowance or other moneys to be spent, or to cover expenses incurred by him, for the purposes of his employment
(d) or (e) ... =
As far as this appeal is concerned, these definitions were not materially changed by the 1986 regulations.
9. In the original determination it was stated that the monies paid to you were an essential user allowance. This was based on a mis-reading of earlier documentation, when it was taken that all officers subject to the decision by XXX BC in 1974 were in the same position. It is accepted that this is not the case.
10. However, although the payments were not by way of an essential user allowance it does not follow that the payments were automatically superannuable. What has to be determined is whether the exclusion from the definition of remuneration of any travelling or subsistence allowance or other moneys to be spent, or to cover expenses incurred by him, for the purposes of his employment (exclusion (c)) applied to the lump sum allowance during the relevant period, that is the last twelve months of your employment, for the purpose of calculating the pensionable remuneration on which your pension benefits were calculated.
11. Your comments on the significance of the permanency of payments for pension purposes, and that this is established by case law, and the analysis of the other exclusions from the definition of remuneration in regulation A3(1) of the 1974 regulations, are noted. However, the Secretary of State considers that this does not determine whether the lump sum allowance was within exclusion (c) in the circumstances of your case.
12. It is accepted that there was a tax liability on these payments. Tax was collected by the Inland Revenue on payments received. What was superannuable within the LGSS was so only by virtue of the relevant provisions, in your case the 1974 regulations which did not state that all taxable remuneration was superannuable remuneration. The regulations provided that for the purposes of the LGSS only such payments as are defined as remuneration can be superannuable.
13. Following Local Government reorganisation in 1974 you were appointed chief executive with XXX BC, whose area included the former authorities of the urban districts of XXX and XXX and part of the urban district of XXX. You were one of the officers to whom annual lump sum car allowances were made following a resolution of the Personnel Sub-committee in February 1974. This resolution followed a report and recommendation of the Treasurer which had been produced to deal with certain problems following reorganisation. It referred to the types of car allowances that could be paid to those staff required to have the use of a car on Council business. The area of XXX BC was four times larger than any of those it replaced and there had been different car allowance schemes in place for the different old authorities. The Secretary of State notes that certain of these officers were to receive, in addition to a basic lump sum, an additional sum to reflect additional mileage due to their location. This would be withdrawn on the provision of central accommodation for all departments. In all the circumstances, he takes the view that the purpose of the allowances was to defray the travel costs that would necessarily be incurred by those officers in carrying out their duties and was, it appears, in lieu of claiming any other travel expenses for such travel.
14. In reaching this view the Secretary of State considers that a distinction can be drawn between an allowance that is paid in recognition of costs necessarily incurred where travel is required by the nature of the duties in a particular post, and an allowance, were one to be paid, which appears to be based solely on some other factor, for example the grade of the officer concerned, without regard to a need for the officer travel to fulfil the requirements of his post. In your case he is satisfied that your post required you to travel on Council business, that in doing so you would necessarily have incurred costs, that the Council intended to make payment in recognition of those costs, and that the lump sum car allowance was the method they chose to do so.
15. It is accepted that the allowance was not calculated by reference to the actual miles travelled in any period, but it was part of a scheme the purpose of which was to defray travel expenses. The Conditions of Service of Local Government Chief Executive Officers refer to car allowances being a matter for local determination which would seem to provide authority for XXX BC deciding on a scheme to suit their particular circumstances. For those officers like you who did not qualify for an essential car user allowance, XXX BC decided on lump sum allowances, the amount of which was not arbitrary but was by reference to a nationally recognised scale for lump sum car allowances. The amount continued to be increased in line with that nationally recognised scale. The allowance did not have to be linked to mileage as it was expressly stated to be a lump sum allowance. Mileage rates were relevant in the context of further allowances for essential users in addition to the lump sum allowance. The Secretary of State notes your contention that your Conditions of Service distinguished between expenses and benefits and that your car allowance was a benefit, but this does not alter his view about the purpose of the allowance. In his view that purpose was such as to exclude it from the definition of remuneration by virtue of exclusion (c).
16. The Secretary of State accepts that the mileage undertaken on Council business may have varied year on year. However, you have not provided evidence that the nature of your post changed over time so that, in your final year of employment, it no longer required you to travel on Council business. Having given careful consideration to your arguments, the evidence provided and the wording of the exclusion in regulation A3(1) of the 1974 Regulations, the Secretary of State decides that the allowance paid to you in the final year of your employment continued to be a travel allowance to cover expenses incurred for the purposes of your employment and therefore within the exclusion (c) in the definition of remuneration in that regulation.
17. You asked the Secretary of State to take account of previous appeal determinations on questions concerning car allowances. The above conclusions are based on the facts of this case in accordance with the 1974 regulations. Comparison with other appeals is not in itself a deciding factor as facts in individual cases may not be identical. The Secretary of State does not consider cases to be identical in all material respects and he is satisfied that it would have been inappropriate to use them as a precedent in determining this appeal. The appeal can only be determined on the relevant facts.
18. The Secretary of State therefore determines as set out above and dismisses your appeal that your annual car allowance was superannuable remuneration for the purposes of the 1974 regulations.
19. A copy of this letter has been sent to the Council.
20. Having made his determination he has no power to alter it but you may refer the matter to the Pensions Ombudsman or to the High Court. Because of this officials may not discuss the case further.
21. The Occupational Pensions Advisory Service (OPAS) is available to assist members and beneficiaries in connection with difficulties which they have failed to resolve. His address is 11 Belgrave Road, London, SW1V 1RB (telephone number 0171 233 8080).
22. The Pensions Ombudsman may investigate and determine any complaint or dispute of fact or law in relation to the local government pension scheme. His address is 11 Belgrave Road, London, SW1V 1RB (telephone number 0171 834 9144).