Thousands of small self administered schemes (Ssas) could be subject to a tax grab from April if they are deemed illegitimate by the revenue office.
From 6 April HM Revenue & Customs is given new discretionary powers to de-authorise schemes that do not have an underlying sponsoring employer.
Once de-registered, schemes are classed as taxable trusts and face an immediate 40 per cent tax charge and up to 30 per cent additional charges subject to circumstances.
The new powers for HMRC came in response to last year's consultation on pension scams, which acknowledged dormant companies were being used to register bogus pension schemes with the tax office in order to facilitate pension scams.
Richard Mattison, director at Ssas trustee Whitehall, said he expected thousands of schemes to be wiped out come April, generating a sizeable income for the tax office.
He said: "I am under the impression HMRC knows exactly what is going on and who they have to get.
"They just don't have the power to do it (de-authorise schemes) but they are getting it now.
"In April lots of schemes will just be wiped out. They will just go."
HMRC said it would not de-authorise schemes on the spot but will allow them to appeal and apply for the tax to be postponed while their appeal goes before the Tribunal.
A spokesman for HMRC said the tax office would always be in correspondence with the scheme before any de-registration took place.
They said: "Where an existing registered pension scheme has a dormant company as a sponsoring employer, HMRC would only de-register the scheme where there is clear evidence that it is not being used to provide legitimate pension benefits within the tax rules.
"HMRC does not use the existing power to de-register schemes lightly, and this will continue with the extended power."
The new powers are designed to hit schemes that function as a vehicle for scams where they are used to transfer pension money into unregulated offshore products.
They will also affect those set up for tax purposes, where a shell company is used to siphon off profits into pension wrappers to avoid paying tax on them.
This could also implicate advisers who have helped set up the structures, assuming they are still trading, Mr Mattison said.
Whitehall has been approached by about 20 individuals seeking help untangling such structures in the past 12 months, Mr Mattison said.
The problem is perfectly legitimate schemes could be entangled in the net too, he added.
For instance, schemes that were set up years ago, where the underlying business has since been sold or ceased trading.
"When a trading company was used to set it up, if you the sell the company or wind it up after you retire, the scheme can continue to run, that is absolutely fine," he said.
But he questioned how HMRC would make that distinction.
Martin Tilley, director of technical services at self-invested personal pension and Ssas provider Dentons Pension Management, said HMRC would need to be sure about the status of a scheme before acting.
He suggested more often than not the criteria would be such that de-registered schemes would attract the full 70 per cent tax charge.
Mr Tilley said: "The whole process is very draconian, that is why the revenue would really have to be sure before de-registering a scheme."
He agreed the number of schemes affected could run into the thousands.
He said: "Numbers of single member schemes, and these are the schemes the revenue will be looking to have checked, could be in the hundred of thousands."
Mr Tilley said HMRC would likely be looking at schemes established more recently, before the changes to the registration process came in that meant schemes are checked thoroughly before being authorised.
Sean McParland, Chartered financial planner at Fairstone Financial Management, welcomed HMRC's new powers but questioned their effectiveness.
Mr McParland said: "Anything that drives out the mischief makers has got to be a step in the right direction. The issue is does HMRC have the manpower to do it properly."
He said the current long authorisation times - lasting up to 12 weeks - suggested it did not have enough staff to deal with issues in the market.
However, he said he was not worried about his clients' schemes being wrongly targeted by the tax office.
He said: "HMRC will raise an enquiry and we can provide them with all the information to prove there is no problem [before they act]."
carmen.reichman@ft.com
