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HMRC internal manual

Pensions Tax Manual

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HM Revenue & Customs
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The scheme administrator: the fit and proper person test

Glossary PTM000001
   

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, whenever they were appointed.

HMRC assumes that all persons appointed as scheme administrators are fit and proper persons unless HMRC holds information, or obtains information, which calls that assumption into question.

Factors that HMRC may take into account when considering if a scheme administrator is a fit and proper person
HMRC will not confirm the fit and proper status of a scheme administrator
HMRC enquiries into fit and proper status

Factors that HMRC may take into account when considering if a scheme administrator is a fit and proper person

More than one person can make up the role of the scheme administrator. Where several persons act jointly as the scheme administrator, the fit and proper person criteria apply to all those persons. Where the scheme administrator is or includes a corporate body, HMRC will consider whether the directors or those controlling the management of the body are fit and proper persons.

Factors that may lead to HMRC deciding that the scheme administrator is not a fit and proper person include, but are not limited to, where it appears to HMRC that the scheme administrator:

  • does not have sufficient working knowledge of the pensions and pensions tax legislation to be fully aware and capable of assuming the significant duties and liabilities of the scheme administrator, or does not employ an advisor with this knowledge;
  • has previously been involved in pension liberation;
  • has previously been the scheme administrator of, or otherwise involved with, a pension scheme which has been de-registered by HMRC;
  • has been involved in tax fraud, abuse of tax repayment systems or other fraudulent behaviour including misrepresentation and/or identity theft;
  • has a criminal conviction relating to finance, corporate bodies or dishonesty;
  • has been the subject of adverse civil proceedings relating to finance, corporate bodies or dishonesty/misconduct;
  • has participated in or been connected with designing and/or marketing tax avoidance schemes;
  • employs as an advisor a person who has been involved in pension liberation or tax avoidance;
  • has been removed from acting as a trustee of a pension scheme by the Pensions Regulator or a Court, or has otherwise seriously contravened the pensions regulatory system, or the regulatory system of any other professional/governmental regulatory body; and/or
  • has been disqualified from acting as a company director or are bankrupt.

For example, HMRC may be aware that an individual has been involved in fraudulently claiming tax credits. If that individual is appointed as scheme administrator, HMRC will want to explore whether they are a fit and proper person.

If the Pensions Regulator does not consider that a person is suitable to be a trustee of a pension scheme, that person may not be able to satisfy HMRC that they are a fit and proper person. However, it does not necessarily follow that if the Pensions Regulator considers a person to be suitable to act as trustee of scheme, that the person will necessarily be considered to be a fit and proper person to be a scheme administrator. This is because the Pensions Regulator and HMRC have different responsibilities and priorities and therefore carry out different checks. Also, HMRC is able to access information that is not available to the Pensions Regulator.

What does ‘employing an advisor with pensions knowledge’ mean?

The scheme administrator may be the employer who set up the scheme or one or more of the directors of a sponsoring employer. Such persons normally do not have a detailed knowledge of pensions and pensions tax legislation. However, HMRC needs to be satisfied that the reporting and operational duties of the scheme administrator will be carried out properly. In this situation HMRC would expect that such a scheme administrator to employ an advisor such as a pension practitioner/provider who does have such a working knowledge and will advise them or act on their behalf.

Whilst the fit and proper person test only applies to the scheme administrator, and not to any advisor, employing an advisor who has been involved in pension liberation or tax avoidance may lead to HMRC deciding the scheme administrator is not a fit and proper person.

The greater the level of involvement by the knowledgeable adviser with the scheme and its administration, the greater the weight given to the scheme administrator’s relationship with that adviser in considering whether the fit and proper person criteria are satisfied. Each situation will be different but the person who is the scheme administrator must be satisfied that they will be able to properly fulfil the role of scheme administrator for that particular scheme, and be able to demonstrate that if necessary.

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HMRC will not confirm the fit and proper status of a scheme administrator

HMRC does not offer a clearance service to confirm whether or not a scheme administrator, or a person who is looking to become a scheme administrator, is a fit and proper person.

HMRC assumes that those appointing scheme administrators will have given proper consideration to the suitability of their scheme administrator to act in such capacity, and that consequently the scheme administrator is a fit and proper person to be a scheme administrator. If HMRC holds information, or obtains information, to question that assumption HMRC may request further information from the scheme administrator, or other people.

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HMRC enquiries into fit and proper status

HMRC has specific powers enabling them to obtain information and inspect documents to enable them to investigate whether or not someone is a fit and proper person to be a scheme administrator. Enquiries into the scheme administrator may be carried out:

  • Before the scheme is registered (for registration applications made on or after 1 September 2014), or
  • After the scheme has been registered, for any registered pension scheme.

If the enquiry is made before the scheme is registered then the powers and processes used are those described at PTM032200.

If the enquiry is made after the scheme is registered then the powers and processes set out below will be used.

Information notices

Sections 159A, 159C and 159D Finance Act 2004

Under Section 159A Finance Act 2004 HMRC can issue an information notice requiring the recipient to provide any information or document that HMRC may reasonably require for the purpose of considering if the scheme administrator is a fit and proper person. Such an information notice can be issued to the scheme administrator or to any other person. Where the information notice is issued to someone other than the scheme administrator HMRC will send a copy of the notice to the scheme administrator.

The restrictions on what the information notice can cover set out at paragraphs 18 to 20 and 23 to 27 Schedule 36 Finance Act 2008 apply. Guidance on this can be found at CH22000 (external users please see http://www.hmrc.gov.uk/manuals/chmanual/CH22000.htm).

Anyone who receives an information notice issued under section 159A Finance Act 2004 can appeal against the notice or any requirement in the notice.

Anyone who fails to comply with such an information notice may be liable to penalties. The penalties that apply are the same as those that apply for failure to comply with an information notice issued under Schedule 36 of Finance Act 2008 - see CH26630 (external users please see http://www.hmrc.gov.uk/manuals/chmanual/CH26630.htm).

Penalties also apply for any material inaccuracy in any information or documents provided in complying with the information notice. The penalties that apply are the same as those that apply for providing inaccurate information or documents in response to an information notice issued under Schedule 36 of Finance Act 2008 - see CH26780 (external users please see http://www.hmrc.gov.uk/manuals/chmanual/CH26780.htm).

In addition HMRC may de-register a pension scheme if a scheme administrator fails to comply with an information notice, provides materially inaccurate information or a document that contains a material inaccuracy - see PTM033200.

Power to inspect documents

Sections 159B, 159C and 159D Finance Act 2004

Under Section 159B Finance Act 2004 HMRC may enter business premises to inspect documents on the premises, if HMRC reasonably requires to inspect those documents for the purpose of considering if the scheme administrator is a fit and proper person.

Such an inspection visit may be made to the business premises of the scheme administrator or to any other person.

Business premises has the same meaning as that given by paragraph 10(3) Schedule 36 Finance Act 2008 - see CH25810 (external users please see http://www.hmrc.gov.uk/manuals/chmanual/CH25180.htm).

HMRC cannot require the provision of a document that would be covered by paragraphs 18 to 20 or 23 to 27 Schedule 36 Finance Act 2008. Guidance on this can be found at CH22000 (external users please see http://www.hmrc.gov.uk/manuals/chmanual/CH22000.htm).

HMRC will usually arrange an appointment to visit premises at least 7 days in advance. In some cases HMRC may ask a tribunal to approve the inspection.

If the HMRC inspection visit has not been approved by a tribunal see CH25650 (external users please see http://www.hmrc.gov.uk/manuals/chmanual/CH25650.htm).

If the tribunal has approved an HMRC inspection visit and you deliberately obstruct an HMRC officer in the course of their visit you may be liable to penalties - see CH25700 (external users please see http://www.hmrc.gov.uk/manuals/chmanual/CH26240.htm) and CH26630 (for external users http://www.hmrc.gov.uk/manuals/chmanual/CH26630.htm).

If a scheme administrator deliberately obstructs an HMRC officer in the course of an inspection visit that has been approved by the tribunal they have given HMRC grounds to de-register the pension scheme - see PTM033200.