XAFINITY has called for urgent regulatory changes to mandate professional oversight as it said HM Revenue & Customs (HMRC) has sharpened its focus on the pension set-ups.
It reported an increasing number of inquiries from small self-administered scheme (SSAS) trustees, and their advisers, where the SSAS has not been administered by a specialist pensions professional and has subsequently experienced serious administrative issues, Accountancy Age’s sister title IFAonline writes.
These include fines for non-submission of the pension scheme returns; loans that have been made from the scheme without the required security; scheme owned properties that have rent arrears; members wanting to take benefits; and, in some cases, the sponsoring employers that have ceased trading.
Xafinity SIPP & SSAS business development manager said issues such as these “can and will” lead to serious tax charges and potential fines. Members will also suffer through lower pension fund values at retirement, he said.
A tribunal in June 2013 found that a SSAS had made an unsecured loan to the sponsoring employer and, despite the loan plus interest being repaid in full, HMRC noted that the loan had not been secured as required and levied a £55,000 tax charge.
Xafinity SIPP & SSAS business development manager 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% 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.”
In the past it was mandatory for a SSAS to have an independent pensioner trustee, approved by the Inland Revenue. However, this was removed in 2006 and replaced by the need for an administrator which was responsible to HMRC for the correct operation of the scheme.
Xafinity said anyone could be the administrator and thousands of SSAS members decided to “go it alone”.
It is also likely that some will also have fallen foul of ‘pension liberation’, an area that HMRC will undoubtedly be looking into, and others may be targeted by unregulated investment promoters, the provider warned.
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