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HMRC internal manual

Pensions Tax Manual

The scheme administrator: essential principles

Glossary PTM000001
   

Section 270, section 153(5) and sections 158(zb) and (f) Finance Act 2004

To be registered by HMRC, a pension scheme must have a scheme administrator. This is the person appointed in accordance with the scheme rules to be responsible for complying with the functions and responsibilities of a scheme administrator under Finance Act 2004.

The role of the scheme administrator
Who can be a scheme administrator?
Residency requirement for scheme administrators
Requirement to be a fit and proper person
Scheme administrator declarations
What happens if there is no scheme administrator?

The role of the scheme administrator

The scheme administrator duties are specified under Finance Act 2004 and supporting regulations. The scheme administrator’s duties include:

  • registering the pension scheme with HMRC,
  • paying certain taxes to HMRC,
  • operating tax relief on contributions under the relief at source system - see PTM044220,
  • reporting events relating to the scheme and the scheme administrator to HMRC,
  • making returns of information to HMRC,
  • providing information to scheme members, and others, regarding the lifetime allowance, pension input amounts, benefits and transfers.

PTM160300 provides a summary of the scheme administrator’s obligations to provide information to HMRC and others.

A scheme administrator can appoint a practitioner to act on their behalf in relation to some of these duties - see PTM157000.

Liability to tax

The scheme administrator is liable for payment of certain tax charges under Part 4 of Finance Act 2004 in connection with the scheme. If more than one person is appointed as scheme administrator, each is jointly and severally liable for any tax charges or penalties. The scheme administrator is liable to the following tax charges under the Finance Act 2004:

  • Section 205: short service refund lump sum - see PTM063500,
  • Section 205A: serious ill-health lump sum charge (only for payments before 16 September 2016) - see PTM063400,
  • Section 206: special lump sum death benefits charge - see PTM073200,
  • Section 207: authorised surplus payments charge - see PTM145200,
  • Section 217: lifetime allowance charge (joint and several liability with the member) - see PTM086000,
  • Section 237B: annual allowance charge (joint and several liability with the member, where the member has given notice that they want to use the ‘scheme pays’ option - see PTM056000),
  • Section 239: scheme sanction charge - see PTM135000,
  • Section 242: de-registration charge - see PTM0333000.
  • Sections 244A and 244J: overseas transfer charge – see PTM102200.

Section 9(1A) Taxes Management Act 1970

Section 254 Finance Act 2004 and Regulations 4 and 5 The Registered Pension Schemes (Accounting and Assessment) Regulations 2005 -SI 2005/3454

Scheme administrator tax charges are not within the self-assessment procedures. Therefore any tax liabilities of a scheme administrator should not be included in any self-assessment return that the trustees of the same pension scheme may complete in respect of that scheme.

Apart from the scheme sanction charge, the scheme administrator must report the tax due using the accounting for tax (AFT) return - see PTM162000.

Where a scheme administrator does not pay the tax due on time HMRC will issue an assessment for the outstanding tax.

Where a scheme administrator is liable for a scheme sanction charge, HMRC will issue an assessment to the scheme administrator in respect of that liability see PTM135300.

Insurance company liable as scheme administrator in certain circumstances

The Pension Benefits (Insurance Company Liable as Scheme Administrator) Regulations 2006 - (SI 2006/136)

An insurance company will be treated as the scheme administrator for the purposes of section 206 Finance Act 2004 if they are paying:

  • a pension protection lump sum death benefit,
  • an annuity protection lump sum death benefit,
  • a drawdown pension fund lump sum death benefit, or
  • a flexi-access drawdown fund lump sum death benefit.

under an insurance contract or annuity purchased using sums and assets held for the purpose of a registered pension scheme.

This means the insurance company is responsible for paying the special lump sum death benefits charge tax due under section 206 Finance Act 2004, must report relevant payment using the AFT, and will be liable to penalties for late payment, filing and any errors as appropriate.

Information requirements

Section 250 Finance Act 2004

The Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567

The scheme administrator is required to retain records relating to the administration of the scheme, for example records of payment into and out of the scheme, for at least six tax years following the year to which the record relates. PTM160200 gives full details of the record keeping requirement.

In addition to the accounting for tax return mentioned above the scheme administrator may also have to submit a Registered Pension Scheme Return (PSR) - see PTM163000 - or an Event Report - see PTM161000 to HMRC.

The Registered Pension Schemes (Provision of Information) Regulations 2006 prescribe when the scheme administrator has to submit information to HMRC, insurance companies, other scheme administrators, members and others. Guidance on these information requirements is at PTM160300.

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Who can be a scheme administrator?

Section 270 Finance Act 2004

The scheme administrator is the person (or persons) appointed in accordance with the pension scheme rules to be responsible for carrying out the function of the scheme administrator specified by and under Part 4 Finance Act 2004.

The scheme administrator can be an individual or an organisation such as an employer or specialist pension administration company or a mixture of both.

More than one person can be the scheme administrator. If more than one person is appointed as scheme administrator, each is jointly and severally liable for any tax charges or penalties due on the scheme administrator.

Schemes that automatically became registered schemes on 6 April 2006

Paragraph 4 of Schedule 36 Finance Act 2004 provides for who became the scheme administrator when a scheme was automatically registered on 6 April 2006. PTM152000 tells you who the legislation states is the scheme administrator of such schemes.

New scheme administrators can be appointed to these schemes on or after 6 April 2006 just like a scheme that applied for and became a registered pension scheme - see PTM154000.

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Residency requirement for scheme administrators

Section 270(2) Finance Act 2004

To be a scheme administrator you must be resident in one of the following countries:

  • the United Kingdom
  • another EU member state
  • a European Economic Area (EEA) state which is not a member of the EU (that is, Norway, Iceland or Liechtenstein).

Anyone who is not resident in one of these countries cannot be a scheme administrator.

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Requirement to be a fit and proper person

Sections 153(5)(g) and 158(zb) Finance Act 2004

All the persons that make up the scheme administrator must be a fit and proper person to be a pension scheme administrator. HMRC can refuse to register a pension scheme if it appears that any person who makes up the scheme administrator is not a fit and proper person. HMRC can also de-register a scheme if it appears that one of the persons who make up the scheme administrator is not a fit and proper person. This requirement applies to all scheme administrators, that is:

  • scheme administrators appointed on or after 6 April 2006, and
  • those persons who are the scheme administrator in accordance with paragraph 4 of Schedule 36 Finance Act 2004 (scheme administrators of schemes automatically registered on 6 April 2006).

PTM153000 describes some of the factors that HMRC will consider in deciding if someone is a fit and proper person to be a scheme administrator.

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Scheme administrator declarations

Section 270(2) and (3) Finance Act 2004

When someone is appointed as a scheme administrator on or after 6 April 2006 they can only be a scheme administrator if they make certain declarations to HMRC including that they:

  • understand that they will be responsible for discharging the functions conferred or imposed on the scheme administrator of the pension scheme by and under Part 4 Finance Act 2004, and
  • intend to discharge those functions at all times, whether resident in the United Kingdom or another state which is a member State or a non-member EEA State.

These declarations must be made electronically using Pension Schemes Online. The scheme administrator will make this declaration either when they apply to register a pension scheme or add themselves as a scheme administrator to an existing registered pension scheme using Pension Schemes Online.

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What happens if there is no scheme administrator?

If there is no scheme administrator HMRC can decide to de-register the pension scheme - see PTM033000.

The tax legislation also has specific provisions enabling:

  • Someone who has resigned from the role of scheme administrator retaining liability as if they were the scheme administrator until a new scheme administrator has been appointed,
  • The duties and tax liabilities of a scheme administrator to pass onto other person(s), including the pension scheme trustees and the members, in certain circumstances.

PTM154000 provides more information about what can happen when a scheme administrator is changed. PTM155000 describes when and how scheme administrator liabilities can pass on to other persons(s).