In its latest measures to protect pension scheme members against pension liberation activity, HMRC has introduced a fit and proper person test for scheme administrators.
As of 1 September 2014, where HMRC is of the understanding that the scheme administrator does not meet the fit and proper requirement they can refuse to register a newly established scheme, or can de-register an existing pension scheme. De-registration of a scheme can result in significant tax charges.
There is no definition of what a “fit and proper” person is, but HMRC guidance includes a list of factors which would indicate that a person is not fit and proper. These factors include:
- Not having sufficient working knowledge of pensions and pensions tax legislation or not having an adviser with such knowledge.
- Having previously been involved with pensions liberation.
- Having previously been a scheme administrator of, or being involved with a pension scheme which has been de-registered.
- Previous involvement in fraudulent behaviour including conduct in relation to tax and tax repayment systems.
- Having any criminal conviction or having been subject to any adverse civil proceedings relating to finance, corporate bodies or dishonesty.
- Previous participation in or connection to designing and/or marketing tax avoidance schemes.
- Employing an adviser who has been involved in either pensions liberation or tax avoidance.
- Having been previously removed as a pension scheme trustee by the Pensions Regulator or having contravened either the pensions or any other regulatory system.
- Previous disqualification from being a company director.
The process for registering a new scheme with HMRC now includes a requirement that the scheme administrator signs a declaration that they are a fit and proper person. HMRC may require the scheme administrator to provide further information, and may conduct further investigations including asking other parties for information in relation to the proposed scheme administrator and may carry out inspection visits. This could significantly delay registration of a scheme and if HMRC do have any cause to believe that the scheme administrator does not meet the requirements then they can refuse to register the scheme.
For schemes already registered, HMRC will assume that the scheme administrator currently appointed meets the requirements unless/until they come across information to the contrary. There are significant tax consequences for a scheme if it is deregistered and trustees may wish to make an assessment as to whether they consider their currently appointed scheme administrator meets the criteria.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.