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Is your SSAS Administrator ‘fit & proper’?

New HMRC powers to counter pension liberation also impact SSAS Administrators who must declare they are ‘fit and proper’ to run the scheme. Martin Tilley, director of technical services, Dentons looks at the HMRC guidance

As part of the on-going fight against liberation of pensions, amendments have been made to the Finance Act 2004, which, amongst other new powers, allow HMRC to prevent the registration of new occupational schemes (including Small Self-Administered Schemes) if they believe that the scheme’s Administrator is not “fit and proper”.

For all new applications post 1 September 2014, the Administrator must declare they are fit and proper and if necessary HMRC will have powers to undertake extensive checks to satisfy themselves before registration will be granted.

They will also have power to de-register an existing pension scheme if they have concerns.

A scheme Administrator might be an individual or several individuals acting together (such as the trustees) a corporate body or public sector body. The scheme’s trust deed and rules will usually set out who the Administrator is. The main roles of the Administrator are:
* Registering the scheme with HMRC
* Operating tax relief on contributions under the relief at source system
* Reporting events relating to the scheme’s administration
* Making formal returns to HMRC
* Providing information to the scheme members about annual allowances, lifetime allowance usage and other benefits and/or transfers.

Guidance as to who is not ‘fit and proper’
There is no test or qualification to pass and whilst not setting out a definition of who or what a “fit and proper” party is, HMRC do provide plenty of guidance on factors that would lead them to believe a person or parties are not up to the tasks: These include:
* Does not have sufficient working knowledge of the pensions and pensions tax legislation to be fully aware and capable of assuming the significant duties and liabilities of the scheme administrator, or does not employ an adviser with this knowledge;
* Has previously been involved in pension liberation;
* Has previously been the scheme administrator of, or otherwise involved with, a pension scheme which has been de-registered by HMRC;
* Has been involved in tax fraud, abuse of tax repayment systems or other fraudulent behaviour including misrepresentation and/or identity theft;
* Has a criminal conviction relating to finance, corporate bodies or dishonesty;
* Has been the subject of adverse civil proceedings relating to finance, corporate bodies or dishonesty/misconduct;
* Has participated in or been connected with designing and/or marketing tax avoidance schemes;
* Employs as an adviser a person who has been involved in pension liberation or tax avoidance;
* Has been removed from acting as a trustee of a pension scheme by the Pensions Regulator or a Court, or has otherwise seriously contravened the pensions regulatory system, or the regulatory system of any other professional/governmental regulatory body; and/or
* Has been disqualified from acting as a company director or are bankrupt.

Whilst most of the above criteria would appear common sense, the first listed is a catch all which could easily catch out the lay Administrator and in particular those that have chosen to operate their Small Self-Administered Schemes without professional support post the abolishing of the requirement for a scheme to have a Pensioneer Trustee.

HMRC’s risk-based approach
HMRC operates a risk-based approach to its activities and will focus on cases where they believe there is a significant risk of non-compliance. They might well examine cases without a recognised professional Administrator as being more of a risk than those that do. That said, HMRC will assume an Administrator to be fit and proper unless they have reason to believe they are not. This will usually be triggered where they become aware by virtue of inaccurate or misleading information or where they are specifically notified by other parties. New powers conveyed to them by virtue of sections 159A and 159B of Finance Act 2004 permit them to ask for detailed information and even perform inspection visits to the premises of the Administrator.

These changes should have no material impact on scheme administrators with a good knowledge of pensions legal, tax and reporting requirements, but there are penal downsides for those that err.

If HMRC deem the Administrator as not being fit and proper, they may de-register the scheme. This has significant tax implications, the first of which is a deregistration tax penalty equal to 40% of the scheme’s assets.

Clearly, the downsides of not complying with HMRC’s requirements can be hugely detrimental and advisers would be wise to raise these issues with their corporate clients so they can if necessary take appropriate action.

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