The entitlements of a UK-resident individual (the “Individual”) as a member of a UK defined-benefit workplace pension plan (the “UK DB Plan”) related to services rendered by the Individual while employed and resident in the UK and was a pension plan for the purposes of the Act. The UK employer made contributions to the UK DB Plan only while the Individual was resident in the UK.
After the Individual became resident in Canada, and before he had attained the age of 55, the commuted value of the Individual’s member benefits under the UK DB Plan (the “Commuted Value”) were directed to be transferred (the “Transfer”) directly to a self-invested personal pension (“UK SIPP”) established pursuant to UK legislation of which the Individual was the sole beneficiary. The Individual was only entitled to affirm or veto recommended transactions with no capacity to place or direct trades within the UK SIPP.
In finding that the Commuted Value was required to be included in the Individual’s income on the Transfer, CRA stated:
[T]he Individual is considered to have constructively received the benefit on the basis that, by virtue of the Transfer, the benefit has been set apart for the Individual. Therefore … the Individual would be considered to have received the benefit (i.e., the Commuted Value) in the year of the Transfer and would be required to include the amount of the benefit in income under subparagraph 56(1)(a)(i). …
Furthermore … even if the constructive receipt doctrine were found not to apply, subsection 56(2) would apply to include the Commuted Value in the Individual’s income under subparagraph 56(1)(a)(i) in the year of the Transfer. In general terms, subsection 56(2) applies where a taxpayer directs or concurs in the payment of an amount to a third party (such as a UK SIPP) and that amount, if it had been paid to the taxpayer, would have been included in the taxpayer’s income.