Lisa Webster: New SSAS rules explained

This year is set to be a very special one: not since 2010 have we had the excitement (!) of three finance bills in one year.

The second finance bill was released on 8 September and, as anticipated, contained the clauses pulled from the first one when the snap election was called. Thus the money purchase annual allowance and the guidance allowance are back with us.

But what is of particular interest are the new draft clauses since released that will form part of the third finance bill of the year.

Under the heading of “pensions tax registration” we have clauses relating to the status of the sponsoring employer of an occupational pension scheme. From previous consultations and comments from The Pensions Regulator, we know the regulators are waking up to concerns around the use of SSASs by scammers for pension liberation purposes.

It is good to see positive action being taken to make scamming harder and we are optimistic this is the first step of many, with the cold calling ban hopefully still high on the agenda.

So what’s changing?

From April 2018, FA 2004 will be amended, allowing HM Revenue & Customs to refuse to register occupational pension schemes where the sponsoring employer is a body corporate that has been dormant for one month or more in the last year. HMRC will also be able to de-register occupational pension schemes where this condition is met.

There are a few points to note on this. Firstly, the rules refer to a “body corporate”, so any employers that are partnerships or sole traders will not be affected.

Secondly, in terms of registering new schemes, my first thought was that a dormant company cannot be a sponsoring employer anyway. By definition, it cannot be dormant if it has employees.

However, the fact that the company cannot have been dormant in the last 12 months means there is potentially an issue for anyone who buys an “off the shelf” dormant company, which is then used to start a business, if they wanted to set up a SSAS within the first year.

The legislation is targeted at scammers using this as a quick way to set up schemes but legitimate start-up businesses may well suffer collateral damage.

Thirdly, HMRC will have the powers to de-register schemes with dormant employers, but there will not be an automatic requirement for them to do so. The likely intent is for this to be used against those scammers using this modus operandi, allowing HMRC to de-register multiple schemes quickly and easily.

In terms of a legitimate employer that later becomes dormant, on a scheme with no other reason to draw HMRC’s attention, then one would hope registration would not be removed. At worst, there would be the chance to appeal.

It is worth noting it appears that, for established schemes where there is no employer at all, no implications arise out of the new rules. An occupational scheme is a scheme established by an employer for the benefit of employees, but if the employer is later removed it still continues to be an occupational scheme, as the definition only relates to the establishment of the scheme.

If there is no employer at all then it cannot become dormant, and the absence of an employer does not alone give HMRC grounds for de-registration.

This is good news for legitimate firms that are later dissolved or sold on with the link to the SSAS removed. There are plenty of good reasons why the SSAS would want to continue, not least the expense and administrative pain of moving assets to individual Sipps or a group Sipp structure, especially when assets are held collectively and/or property is involved.

This would especially be a big issue where Scottish properties are held, given Revenue Scotland’s stance is to apply land and buildings transaction tax on transfers between pensions.

The legislation is a positive step in the ongoing war against pension scammers but let us hope legitimate schemes are not caught in the crossfire.

Lisa Webster is technical resources consultant at AJ Bell

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