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Beware the new SSAS crackdown

HMRC has stated it will have the discretion to de-register schemes where there is no active employer link, putting thousands at risk of tax charges

Nigel BennettThe recent Department for Work and Pensions publication of the pension scams consultation response contains an important and potentially costly sting in the tail which could affect those operating a SSAS without an active sponsoring employer.

Paragraph 4.4 confirms HM Revenue & Customs will have the discretion to de-register existing schemes where there is no active employer link. This creates huge uncertainty for schemes, such as those where:

  • The employer ceases to trade, or winds up, either deliberately or due to an event such as insolvency
  • The sponsoring employer is intentionally removed prior to sale of the company

This could mean many thousands of pension schemes find they are at risk of de-registration tax charges, or need to transfer to other registered pension schemes in order to avoid de-registration.

Many of these schemes may unnecessarily incur costly fees in order to move investments to an alternative scheme such as a Sipp.

Martin Tilley: Time to tighten the rules on SSASs

We do not believe the wording of the DWP response was drafted to deliberately create uncertainty and guess this discretion has been included for positive reasons such as in the above examples (assuming the Government sees the above as legitimate reasons for the absence of an active sponsoring employer). However, we would welcome speedy clarification prior to the drafting of future legislation.

This issue could simply be solved by an exception for those without an active sponsoring employer, provided the scheme has an independent professional trustee. Indeed, it was disappointing to see the Government has missed the opportunity of improving scheme compliance by not restoring the role of the professional pensioneer trustee, although one wonders whether it is keeping its options open by using the phrase “at this stage” at the end of paragraph 4.9.

Nigel Bennett is sales and marketing director at InvestAcc

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. The section 4.4 cited in the article goes on to say:

    “… HMRC can decide not to de-register a scheme in legitimate circumstances… The existing right of appeal if HMRC rejects a scheme registration will apply to this new requirement.”

    So IHMO if you’ve got a SSAS without a sponsoring employer being looked after by a member of AMPS as Pension Trustee you should be fine.

    If you have no Pension Trustee and are operating the scheme as Scheme Administrator on a DIY basis then life will get more expensive.

  2. In dismissing the idea of reinstituting the role of pensioneer trustee, HMRC are at least being consistent with past statements (eg to the Pensions Industry Stakeholder Forum which meets next on 2 October – I shall be attending). I suspect they have been lobbied by representatives of SSAS members who do not want the additional cost reloaded. That could be used as an argument against deregistration of ‘legitimate’ SSASs, ie the imposition of extra costs in transferring elsewhere.

    Of course the problem HMRC is tackling is the so-called ‘fake SSAS’, set up for a single member. Is it time to make one-member SSASs ‘Registrable schemes” and thus within the scope of TPR’s scheme return legislation? At present, although classed as occupational pension schemes they escape regulatory scrutiny.

  3. Is it safe to assume that an orphan SASS where the original firm has been sold but the family still want to keep the pension scheme will be OK???

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