761 INDEX
SUPERANNUATION ACT 1972
LOCAL GOVERNMENT SUPERANNUATION SCHEME REGULATIONS 1986 (the 1986 regulations)
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1995 (the 1995 regulations)
LOCAL GOVERNMENT PENSION SCHEME REGULATIONS 1997 (the 1997 regulations)
1. I refer to your letter of 17 January 2000 in which you appeal (under regulation 102 of the 1997 regulations) to the Secretary of State for the Environment, Transport and the Regions against the decision of Mr XXX, the Appointed Person in relation to your local government pension scheme (LGPS) dispute with XXX Council (the council).
2. The Appointed Person upheld the council’s method in calculating the money value to you of a car leased by the council that you used. You contend that they should include the full value added tax (VAT) charge in their calculation.
3. The Secretary of State’s powers under regulations 102 and 103 of the 1997 regulations are to reconsider the original disagreement referred to the Appointed Person under regulation 100. This regulation refers to a matter relating to the LGPS, which effectively means whether the provisions governing the LGPS have been correctly applied in the circumstances. There are no provisions to award compensation where claims are made that information has not been provided with regard to the LGPS or for the cost of lodging an appeal. Like the Appointed Person the Secretary of State has no powers to direct a local authority to act outside the provisions of the regulations.
4. The question for decision: The question for decision by the Secretary of State is how the money value of the personal use of your leased car should be calculated for the purpose of finding the money value to be included in your pensionable remuneration.
5. The Secretary of State has considered all the representations and evidence. Copies of documents supplied by the Appointed Personwere sent to you under cover of the Department’s letter of 3 March 2000.
6. Secretary of State’s decision: The Secretary of State has taken into account the appropriate regulations. He finds that:-
a) to find the money value, the full leasing charge must be adjusted so that only that element relating to the personal use of the leased car is taken into account in the money value calculation, and that this is achieved by first deducting your own contribution from the full leasing charge and then multiplying the resulting figure by the percentage of personal (to total) mileage undertaken; and
b) the full VAT charge should be included in the calculation of the money value of a leased car.
7. The Secretary of State’s decision replaces that made by the Appointed Person. His reasons and the regulatory provisions which he considers apply in yourcase are set out in the annex to this letter, which forms an integral part of this decision. He is acting judicially and has no power to modify the way the regulatory provisions apply to the facts of the case. Having made his decision he has no power to alter it and his officials cannot discuss the case further. The decision is binding and can only be overturned by a judgement of the High Court or the Pensions Ombudsman.
8. This completes the second stage of the internal dispute resolution procedure. The Pensions Advisory Service (OPAS) is available to assist members and beneficiaries in connection with difficulties which they have failed to resolve. Their address is 11 Belgrave Road, London, SW1V 1RB (telephone number 020 7233 8080).
9. The Pensions Ombudsman may investigate and determine any complaint of maladministrationor any dispute of fact or law in relation to the LGPS made or referred in accordance with the Pension Schemes Act 1993. His address is 11 Belgrave Road, London, SW1V 1RB (telephone number 020 7834 9144).
10. A copy of this letter has been sent to the Appointed Person, your pension manager and your former employer.
1. The following evidence has been received and taken into account:
(a) from you: letters dated 17 (with enclosures) and 31 January 2000; and
(b) from the Appointed Person: letter dated 18 February 2000 (with the enclosures copied to you with the Department’s letter of 3 March).
REGULATIONS CONSIDERED AND REASONS FOR DECISION
2. From the evidence submitted the following relevant points have been noted:
(a) in 1989 the council introduced a car leasing scheme for its employees;
(b) in connection with your employment you were provided with a leased car;
(c) the total cost to the council of the leased car was £3,909 including £292 non-recoverable VAT and £333 insurance;
(d) you paid £1,051 toward the council’s cost;
(e) in August 1996 you ceased employment with the council and your pension was put into payment;
(f) when calculating your pension the council included the remaining £2,858 portion of the car lease cost to them of the leased car as pensionable remuneration after non-recoverable VAT, insurance and your contribution were deducted.
3. The Secretary of State in reaching his decision has had regard to the regulations which, in his view, apply. When the council introduced its car lease scheme the 1986 regulations applied. A member’s remuneration was defined in Schedule 1 as “...all the salary...and other payments paid or made to an employee as such for his own use and the money value of any ... other allowances in kind appertaining to his employment”. From 1 January 1993 the definition was amended to exclude the money value of the provision of a motor vehicle, but a provision was included to protect the position of those who had this money value treated as remuneration, so long as they continued without a break to have a leased car. A similar definition, exclusion and protection were included in the 1995 regulations which applied when you retired. The equivalent provisions in the 1997 regulations are not relevant to your case as you had retired by then.
4. It is not disputed that the money value of a leased car has been treated in your case as remuneration, following an earlier appeal to the Secretary of State. The question is how that money value should be determined. The Secretary of State takes the view first that it is only the personal use element of the leased car which can be regarded as an allowance in kind, not the leased car itself. Provision and use of a leased car for official purposes effectively constitutes a means by which the council meets the cost of travel expenses incurred by an officer in carrying out the council’s business. Therefore the business use element cannot be taken into account as part of your remuneration since you do not derive any personal benefit from that element.
5. Although the regulations do not prescribe the formula to be used to calculate the money value of the personal use of leased cars, the Secretary of State notes that a clear and effective methodology is well established for achieving the intention of the requirement and therefore ensuring compliance with the regulations. In his view the money value which can be regarded as your remuneration is an amount equal to the difference between the total value of the personal use element of the car and the actual cost to the employee including any contributions paid. The Secretary of State takes the view that to find the money value, the full leasing charge must be adjusted so that only that element relating to the personal use of the leased car is taken into account in the money value calculation, and that this is achieved by first deducting your own contribution from the full leasing charge and then multiplying the resulting figure by the percentage of personal (to total) mileage undertaken.
6. The Secretary of State next considered the question of including VAT in the money value calculation. It is not disputed that there is a total leasing charge that constitutes the overall money value of the provision of the car from which a calculation of the money value of the personal use element may be derived. The council, however, have not included in this sum the amount of VAT originally chargeable on it, which they themselves have been able to reclaim. The lease company’s scale of charges includes an element of VAT which may or may not be recoverable by the lessee. In this case the council were able to reclaim VAT which reduced the ultimate cost to them. However, the Secretary of State takes the view that it is the amount that the leasing company charge to the council in the first instance to the lease car that should be taken as the full leasing charge for the purposes of determining the money value of the car. Therefore on that basis VAT should be included in the money calculation.
7. The Secretary of State concludes therefore that the money value of the personal use of your leased car is to be calculated on the basis indicated in paragraphs 4 and 5 above and that the full VAT charge should be included in the calculation to find the money value to you for the purpose of establishing pensionable remuneration for the relevant period under the 1995 regulations.