News
02/03/2010 - Breaking The Rules
Under the A-Day regulations, small self-administered schemes (SSAS) were no longer required to have a pensioneer trustee. Pensioneer trustees are qualified professionals authorised by HM Revenue & Customs to oversee scheme operation. Instead, they had to have a scheme administrator who registered as such with HM Revenue & Customs.
There was no requirement for the scheme administrator to have any professional knowledge whatsoever of the pension arrangements for which they acted as administrator. The obvious result was that when the SSAS clients heard they no longer needed to pay for the services of a professional trustee, they decided to run their SSAS on a DIY basis and cut costs. Estimates based on a sample of 1,700 cases show that the number of DIY SSAS currently in existence is marginally in excess of 2,000. However, how many of these are genuinely aware of the duties and responsibilities they are required to fulfil? These responsibilities are summarised below.
Needless to say, where these are not carried out correctly, there is a host of fines and penalties. The fines levied by HMRC are summarised below. However, the DIY SSAS may also incur fines from other bodies such as The Pensions Regulator and FSA. The most likely breaches of the administrator’s duties are where reports are not submitted to HMRC either correctly or on time. It will be interesting to note how many cases missed the 31st January deadline and face hefty fines.
We are seeing a growing number of SSAS clients approaching professional practitioners to take back the role of scheme administrator but what of the approximate 2,000 SSAS who are still going it alone? Unless they are carrying their responsibilities out to the letter, eventually they will get into a serious mess which could prove costly.
DAY TO DAY ADMINISTRATION
There is a long list of everyday tasks to be performed, but few DIY SSAS clients would know how to do any of the following:-
Maintain accurate and legal trust documentation.
Calculate correct retirement benefits, including reviews and valuations.
Operate a PAYE system for pension payments.
Ensure investments made are not taxable.
Comply with Money Laundering Regulations.
Register under the Pension Registry, the Data Protection Registry and the Pensions Regulator, and maintain these as necessary.
THE FORMAL DUTIES OF THE SCHEME ADMINISTRATOR
A number of reports and returns must be submitted to HMRC within set timescales.
Event reports – 18 different events must be reported where relevant. The deadline is the 31st January after the tax year end.
Accounting for tax returns – Quarterly returns to report certain taxable events. The deadline is 45 days after the relevant quarter end.
Pension scheme returns – A lengthy annual report giving information about the SSAS. The deadline is the 31st January after the tax year end.
Statutory information to be given to scheme members on six different events.
Tax reclaims – an annual tax claim where tax deducted from investments can be reclaimed.
HM REVENUE & CUSTOMS FINES:-
Failure to provide information requested |
£300 plus £60 a day |
Negligent or fraudulent provision of incorrect information |
Up to £3,000 |
Failure to keep records |
Up to £3,000 |
Failure to submit a Pension Scheme Return |
£100 plus £60 a day |
Negligent or fraudulent submission of an incorrect Pension Scheme Return |
Up to £3,000 |
Failure to produce documents requested |
£300 plus £60 a day |
Negligent or fraudulent production of incorrect documents |
Up to £3,000 |
Failure to submit an accounting tax form |
£100 per quarter |
Negligent or fraudulent production of an incorrect accounting for tax form |
The unpaid tax due |
Serious breaches of regulations resulting in withdrawal of the pension scheme’s Registered status |
40% of the value of the fund plus the fund becomes fully taxable |
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