Personal Pension  

Ssas fines and tax charges on the rise, Xafinity warns

Small self-administered schemes should be forced to use a professional scheme administrator, Xafinity has argued, as it reports an increasing increasing number of enquiries from Ssas trustees and their advisers relating to mal-administration fines and unauthorised tax charges.

The pension and employee benefit specialist claims it is receiving an increasing number of enquiries where a scheme has not been administered by a specialist and as a result has suffered setbacks including:

• fines for non-submission of the Pension Scheme Return;

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• loans that have been made from the scheme without required security;

• scheme-owned properties that have rent arrears; and

• members wanting to take benefits and some cases in which the sponsoring employee has ceased trading.

In 2006 the requirement of an independent professional pensioneer trustee was removed and replace with the need for an administer responsible to HM Revenue and Customs, meaning anyone could take up the role.

Xafinity’s call echoes similar demands for a professional administration requirement from Richard Mattison, director of professional trustee and administrator Whitehall Group, who wrote to HM Revenue and Customs warning that self-administered pension schemes lacking professional administrators are open to abuse by tax cheats and frauds.

The former James Hay director wrote to HMRC in May after initially taking his concerns to The Pensions Regulator. He said that in addition to the threat of fraudulent activity, 7 out of ten schemes that his firm takes on are being improperly run.

In June of this year a small-self administered pension scheme administrator was hit with a £15,000 fine by a tribunal over a £100,000 unsecured loan to a trustee that was treated as an unauthorised payment.

Despite the loan plus interest being repaid in full, HMRC levied a £40,000 tax charge on the employee and £15,000 for the administrator, a chartered accountant, as there were no written loan agreements and no security for the loan. The scheme’s trustees had said they were not aware such criteria had to be met

Jeff Steedman, Sipp and Ssas business development manager at Xafinity, said: “Recent HMRC action demonstrates a change in attitude and while historically HMRC may not have been proactive on these schemes they appear to be sharpening their focus.

“A 55 per cent tax charge could devastate members’ retirement funds and could potentially be avoided with a regulatory change to require a professional administrator. The ‘DIY’ approach to Ssas administration was a mistake and HMRC needs to introduce the requirement for a professional Ssas administrator for all schemes.”