View more on these topics

Martin Tilley: HMRC further tightens the screw on SSASs

The HM Revenue & Customs newsletter released at the end of last month reminded us there is no time limit on how long it can take to decide whether or not to register a pension scheme.

Indeed, it is taking more than three months from first application for a SSAS to formal registration, indicative of the checks being performed and additional questions being asked.

This is part of HMRC’s crackdown on the previous misuse of SSASs created for new or dormant companies for the sole purpose of perpetuating fraudulent investments or pension liberation.

Not only will it refuse to register schemes in such circumstances, it also has the option to deregister existing schemes using its discretionary powers.

Pensions minister: HMRC will not misuse SSAS de-registration powers

The increased timescale of registration is only the first of time hurdles, as the trustees and administrators of ceding schemes are also under pressure to ensure the release of cash equivalent transfer values are only to appropriately established and bona fide registered pension schemes.

A recent Pension Ombudsman determination upheld a complaint against a defined benefit public sector scheme, which “failed to conduct adequate checks and enquiries in relation to the complainant’s new pension scheme”. Clearly, substantial checks by ceding schemes must also be undertaken to ensure the transfer is to a scheme from which genuine retirement benefits will be paid.

Tip of the iceberg

But are the HMRC checks on establishment of new SSASs just the tip of the iceberg? There is evidence it may have increased scrutiny of existing schemes too.

In 2014, it introduced a requirement that each scheme should have a “fit and proper administrator”. It will assume all administrators are “fit and proper” until it is aware of evidence to the contrary but then it has the power to deregister a scheme with penal tax consequences.

Our introducing intermediaries have reported increased numbers of previously “orphaned schemes”- those operating without an acknowledged professional administrator or practitioner – asking for guidance or appointment of a recognised specialist firm. This could well be driven by more in-depth enquiries from HMRC following annual pension scheme returns.

Ros Altmann: HMRC must rethink SSAS measures

That HMRC might be stepping up its interest in current schemes would come as no surprise. It is in its interest, and those of the Treasury, that these schemes, which operate in a largely tax-exempt environment, should be properly and accurately administered.

Aside from the fact these schemes will provide retirement benefits to members, the income of which will be subject to income tax, it must also ensure there is no leakage of funds from the scheme by way of maladministration.

It is on this latter point orphaned schemes should be particularly careful. Aside of the usual annual returns, there are over 20 events that might occur within a registered pension scheme that require timely online reporting. Failure to submit a report could trigger a penalty of £300 and additional daily penalties of up to £60 per day can be charged for continued failure to submit.

Other failures, through insufficient experience or knowledge, can be even more costly.

Five questions to ask if your client’s Sipp provider is bought

An example is the correct documentation of loans to a founder employer. HMRC acceptance of a loan is subject to five key criteria that need to be satisfied and documented. Failure on any one of those criteria means payment of funds by the pension scheme to the employer ceases to be a loan and is in fact treated as an unauthorised employer payment.

These payments can trigger tax charges of 40 per cent of the payment amount on the employer and a further 15 per cent surcharge within the pension scheme.

Advisers whose clients may be operating SSASs without the specialist assistance of an experienced pension scheme administrator, should make them aware of the HMRC interest and ensure those schemes and their administration is complete and up to date, and that the duties of the administrator are fully understood.

Martin Tilley director of technical services at Dentons Pension Management

Recommended

Phil-Wickenden-MM-Peach-700.png

Phil Wickenden: HMRC seeks more power

HM Revenue & Customs is concerned its power is no longer fit for purpose given the extent to which financial information is now held electronically. HMRC already uses information gathered from banks, peer-to-peer lenders and other financial institutions, then checks it against individuals’ tax returns. Its Connect system draws on information from myriad government and […]

Rowanmoor reappointed Standard Life’s SSAS administrator

Small self-administered scheme provider Rowanmoor has been reappointed by Standard Life to administer its SSAS portfolio for a 10-year term. The agreement was effective from 1 October. The relationship between Rowanmoor, which is owned by Embark Group, and Standard Life has lasted 20 years. Through the deal Rowanmoor will provide full administration, advisory and actuarial […]

2

Govt mulls IHT-exempt ‘Care Isa’

The government is considering bringing in a “Care Isa” that would be exempt from inheritance tax as a way to combat the UK’s social care crisis. According to The Telegraph, the Treasury is considering proposals to include a new Care Isa in the social care green paper, which is expected to be published later this […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Good article Martin.
    Another huge pitfall that orphaned clients (and in most cases their Accountants / Tax Advisers) need to be aware of, is the fact that they can’t take their pension income Gross and sort out their tax later via Self Assessment. Pension income must be run through a PAYE scheme first or it’s an Unauthorised Member Payment.
    https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm024600

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com