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Too late to register a SSAS?

15 January 2018

Tight timescales around this time of year can cause issues for employers looking to register a SSAS scheme. Martin Tilley, director of Technical Services, Dentons Pension Management looks at the problems and potential solutions

HMRC’s stance not to register schemes with dormant employers has been topical of late but in fact, HMRC have had the power to request information and documents to enable them to consider fully new scheme registrations, under powers inserted in Section 153A of the Finance Act 2004 by the Finance Act 2014.

In our experience, this power was rarely if ever used in the early period following its implementation and it was not uncommon for a scheme administrator to make an application for registration using the HMRC’s Pension Schemes Online portal and for the scheme to receive registration within a matter of 3 -10 working days.

However, increasingly and certainly since late 2016, HMRC have been using their powers fully and scheme administrators will now receive an acknowledgement of the registration request and accompanying form APSS530.

The form APSS530 asks for copies of the signed scheme establishing deed and rules, as well as a raft of information covering details of the scheme’s sponsoring employer, membership, trustees, proposed investments and any party involved in giving advice with regard to the establishment of the scheme.

The information must be provided within a relatively short timescale of around six weeks and failure to meet the deadline can result in HMRC deciding to cancel the registration request. Providing inaccurate information can result in penalties of up to £3,000 so the submission needs to be full, correct and timely.

Fortunately, most recognised practitioners requesting scheme registrations are well versed in this process and collect all the necessary data at the point of creating the scheme. Frustratingly, there is no facility to submit this data at the same point as the original registration request meaning a delay between original registration request and subsequent data submission. In our experience, this can be several weeks.

HMRC will then review all the submitted material and decide whether to register the scheme. A scheme cannot of course receive transfers from other pension schemes or contributions before it is registered and its bank account is open, which is unlikely to be until the scheme has been registered and a copy of the registration certificate provided to the bank.

Arising problems

All of this can lead to problems if the sponsoring employer is fast approaching its financial year-end and is looking to reduce profits, and subsequently its tax liability, by payment of contributions in its current financial year.

We have experienced several narrow escapes and particularly at this time of year as many employers’ year-ends are fixed at 31 March or 5 April. Realistically at time of publication, it may well be too late to start the registration process now to accommodate employers in this situation.

Alternative strategies might need to be considered. One option might be to extend the company’s year-end, which can be for a period of up to 18 months. However, as this process can only be done once in every five years and alters the company’s reporting dates, it might be considered administratively inconvenient.

Fortunately, there are other options such as paying the contributions to an existing registered pension scheme before the year-end and then transferring them to the SSAS once it has been registered. Scheme members may have current personal or executive pensions from the same employment or indeed from previous employments, although the terms of these policies would need to be scrutinised to determine whether losses might be incurred between contribution and transfer to the SSAS because of, for example, a less than 100% allocation rate.

If no current schemes are available, it might be possible to create a new low cost platform or life office personal pension or self invested personal pension (SIPP) to hold the employer’s contributions for each SSAS member until transferring them to the SSAS. However, there may be both compliance and administration costs if either of these routes are used.

An adviser should also bear in mind that they will have to manage clients’ expectations when considering time sensitive investments. For example, proposed property purchases or the purchase of bonds within specified time limits, will not be possible until the scheme is registered.

A final option might be the conversion of an existing executive pension scheme to a SSAS by amending the governing trust deed and rules so that it becomes a fully self-administered arrangement. A scheme bank account would also need to be opened but as the scheme is already registered, this can usually be done in a much shorter timescale than the creation of a new scheme from scratch.