Focus 96 – Fit and proper persons guidance

On 1 September new guidance was issued regarding those acting as pension scheme administrators. This applies to all pension schemes but is likely to have the greatest impact on small self administered schemes (SSAS).

A scheme administrator has certain obligations by tax law

The guidance relates to new legislation issued on 1 September 2014 which gives HMRC the right to refuse to register or deregister a scheme where the scheme administrator is not deemed a fit and proper person.

Who is a fit and proper person?

There is no definition of a fit and proper person which is why the guidance has been issued to try and clarify what is required of the scheme administrator to meet the requirements. HMRC do make it clear that they will assume the scheme administrator to be fit and proper unless they hold information, or obtain information, which causes it to question that assumption

A scheme administrator has certain obligations by tax law and is likely to be considered a fit and proper person if they are familiar with, and capable of competently performing, the scheme administratorโ€™s responsibilities and there is nothing in their past behaviour to suggest that they should not be responsible for the financial management of the pension scheme.

Where a scheme administrator does not have a full working knowledge of the legislation, both pensions and pensions tax, they are able to employ an appropriate adviser to help them meet the fit and proper requirements.

What factors are HMRC looking for to flag that someone may not be fit and proper?

HMRC have issued a list, although not exhaustive, of factors that they would consider need further investigation. These factors are where the scheme administrator:

  • does not have sufficient working knowledge of the pension 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

What should you do if you have clients you feel need help in this area?

As a scheme administrator and professional trustee of many pension schemes, Talbot and Muir do from time to time come across cases where employers and members have been acting as a scheme administrator without sufficient knowledge to complete their duties appropriately. Previously when we have taken on the role as scheme administrator we have been able to deal with historic issues that would likely have caused tax charges.

With this new legislation it is imperative that schemes such as these are taken over by an appropriate scheme administrator before the scheme is deregistered. Otherwise, this could mean very significant tax charges for the scheme and the current administrator.

If you have clients acting as their own administrator we would be happy to meet with them to discuss the option of helping them to move to a professional scheme administrator.