Taxman's digital overhaul fails to guarantee Ssas fix

Taxman's digital overhaul fails to guarantee Ssas fix

Delays in the tax registration process for new small self-administered pension schemes (Ssas) will not be fixed by widespread investment in making HM Revenue & Customs digital, supposed to speed up processing times.

Martin Tilley, director of technical services at Dentons Pensions, a Ssas provider, told FTAdviser that the registration of Ssass currently takes more than three months, according to his company's data from the last calendar quarter.

Time is of particular importance if the Ssas is being established as a recipient of a defined benefit (DB) transfer, since the cash equivalent transfer value (CETV) provided by scheme trustees is valid for three months only.

But  Mr Tilley said the bank account for the scheme can only be set up once it is registered which HMRC, which means that the money can only be transferred after that.

To overcome this problem, Dentons has on several occasions had to tell customers to transfer their pot into a low-cost personal pension first, then move it to the Ssas once it is registered.

HMRC announced the timeline for its new digital platform last week. Phase one starting on 8 May, means Ssas administrators can apply to register pension schemes with HMRC online.

Phase two – in which the taxman will introduce additional features so administrators can use the service for scheme reporting – will commence on April 2019.

When the platform is completed, HMRC will also issue all notifications regarding registration through the new service.

Details of existing pension schemes, pension scheme administrators and pension practitioners will also be held in the new digital system.

HMRC’s goal is to “improve the service for pension scheme administrators,” it said in a newsletter.

But FTAdviser understands, however, that the time of the registration process won’t change.

A spokesperson said: “The new process will be more user friendly but we will continue to make the necessary checks to ensure that only legitimate pension schemes obtain registration for the valuable tax reliefs available.”

HMRC didn’t disclose how much it is investing in the new registration platform.

Mr Tilley said he had hoped HMRC might be able to shorten the process for registration of new Ssas, though he added he does "fully appreciate the need for the checks to take place to prevent the establishment of Ssas being used for scams or liberation".

“However the safer route to prevent these scams would be the implementation of some form of compulsory regulated professional body to act as a watchdog, and on whom HMRC could place responsibility, which is still not a route being considered.

“The industry would be happy to work with HMRC in any processes that would shorten the time currently taken to get a Ssas registered.”

According to Paul Gibson, managing director of Granite Financial Planning, "a three-month timescale to set up a Ssas does seem too long, however, as many of the pension scams in recent years have originated from Ssas I think HMRC are taking a sensible approach".