HMRC’s move to tighten its pension scheme registration by ditching its “process now, check later” approach means that the registration process could now take a week and potentially longer for a small self-administered schemes,.
Yesterday HM Revenue & Customs responded to calls from the industry to tighten its pension scheme registration system by ditching its “process now, check later” approach and implementing a system of risk assessment prior to registering a scheme.
The revised approach, which was announced yesterday (21 October) and is effective immediately, means occupational pension schemes will no longer be registered immediately upon receipt of a completed form.
According to law firm Addleshaw Goddard, the registration process may now take about a week where there are no unusual or suspicious circumstances. It said advisers will need to take into account these potential delays when setting up new schemes.
Catherine McAllister, partner in the pension department for Addleshaw Goddard, told FTAdviser this would only affect financial advisers who work in the “fringe space”, for example those setting up a Ssas for a small number of people.
She said: “These ones will take more than a week as fraudsters have been targeting these and the revenue will look at these more carefully.
“Advisers need to build in timescales for this but they won’t be able to pre-empt the regulator as we currently don’t know what they are looking for. Advisers need to be careful with their paperwork and make sure to cover everything they think they will need.”
IFAs will need to take this delay into account or their investors will suffer the tax consequences.
Until registration is complete, received pension contributions won’t qualify for tax relief and transfers received from another registered pension scheme will be an unauthorised payment, the law firm added.
Martin Tilley, head of technical services at Dentons, told FTAdviser: “Previously we could see a client with the IFA on a Monday morning, have Ssas documents signed. Back to the office and submit the case for online registration with the answer being immediate. Contributions could be made on the Tuesday or Wednesday.
“However, HMRC may now take a week to approve the case provided it is straight forward. This means that until registration has been confirmed, no contributions should be made as they will not be eligible for tax relief.
“Thus, if you have a client with a 30th October year end, your deadline for submission is now. If there are any delays, it could mean the contribution misses the company year end with the resulting tax consequences.
“It simply needs to be said that IFAs need to take into account these potential delays and not run close to company year-end dealines when setting up new schemes.”