Proposals to mandate the registration of tax advisers: UK pensions industry concern

Implications for third party pension scheme administrators: registration requirements apply

Pension scheme administrators: (i) fall within the definition of "tax adviser" in the draft legislation, even though they are not tax advisers within any commonly-understood sense of the term; (ii) interact with HMRC (this is broadly-defined, as communicating (or even attempting to communicate) with HMRC in any way); and (ii) do not fall within any of the exemptions in draft legislation. Therefore, administrators appear to be caught by the registration requirements.

Falling within the registration requirements will impose an administrative burden on firms. In particular, firms must satisfy certain eligibility requirements, which extend to the "senior managers" of an organisation (for example, company directors or partners in a partnership) and not just the organisation itself. Under the current drafting, it will be necessary for all senior managers of an organisation to comply with the eligibility conditions regardless of whether they are based in the UK or overseas, and irrespective of whether they personally deal with tax matters.

Whilst most of the eligibility requirements appear to be relatively straightforward, some are more problematic; in particular, the requirement that the tax adviser and each of its senior managers must not owe any tax and must not have any outstanding tax returns. It is not clear how this latter requirement might apply to scenarios where tax is disputed legitimately, as non-compliance is not linked to dishonesty or deliberate default. It may also jeopardise the established principle of taxpayer confidentiality, by effectively requiring senior managers to disclose personal financial details to their organisation.

If there are no changes to the provisions, pension administration firms will need to take steps to register with HMRC, including putting in place internal procedures to verify that the senior managers of the firm satisfy the relevant eligibility requirements. It may also be necessary to devise a procedure to monitor on-going compliance.

Implications for pension scheme trustees: delegate direct communication with HMRC

On a literal interpretation of the provisions, it is possible that some trustee communications would bring the trustee within the definition of "tax adviser" under the draft legislation (for example, any member communication which refers to the generic tax advantages of a registered pension scheme). 

However, trustees will not be required to register with HMRC if they do not interact (i.e. communicate in any way) with HMRC. Most trustees have appointed an "authorised practitioner" to deal with HMRC in relation to Pension Schemes Online and the Managing Pension Schemes service. Those who have not done so, should consider doing so now and should also delegate any other HMRC communications to their administrators.

Future developments

There has been intense lobbying in relation to the new requirements, which, it is hoped, are not yet in final form.

In relation to pensions specifically, the Society of Pensions Professionals has provided feedback to HMRC which has called for pension scheme administration to be added to the list of exemptions to the requirement to register.

Given the flaws in the legislation, it is hoped that HMRC will amend the provisions. However, HMRC has not, at the time of writing, publicly indicated that substantive changes will be made. 

Authored by Susanne Wilkins.