Question: 'Part-time SSAS admins put schemes 'at risk' (IFA Online 29th May 2009). The story continues: 'HMRC has the power to levy a 55% tax charge on scheme assets......'
Well guys, I checked with HMRC @ Nottingham and they have never levied any such tax charge. The source of this story in the newspaper was Xafinity, a huge pensions admin Company, similar to 'Cr*pita' (as Private Eye with some justification call them ). Well they would say that wouldn't they?
Mike Morrison, AXA: All schemes potentially have the possibility of having tax charges levied by HMRC. Trustees need to be aware of the circumstances where this could happen and understand the implications, and avoid these circumstances if possible.
David Seaton: Finance Act 2004 sets out a taxation regime for pensions that make unauthorised member payments and unauthorised employer payments. If a scheme makes such a payment then HMRC have a duty under the law to levy the appropriate tax charge. Currently, HMRC will only be aware of the unauthorised payments if they are disclosed on the Scheme Return or as part of an HMRC audit. Since A-Day was only three years ago and HMRC administration and audit procedures have only just bedded down it is not surprising there have been few if any charges.
If anyone has doubts on the complications of Finance Act 2004 then read Schedule 29a (when you have found it) on taxable property and the possibilities of getting wrong. Clients and advisers should be warned, the dangers of getting it wrong are huge, potentially very costly and your clients are best protected by a specialist.
Stewart Dick: The point Xafinity are making is that the rules surrounding SSAS can be complex and it's important that those running the plan, be they Trustees or Administrators, fully understand those rules.
With regard to the 55% tax charge referred to in the article quoted I suspect this relates to possible unauthorised payment charges. For example, if a SSAS were to invest in taxable property (e.g. residential property or tangible moveable assets) then unauthorised payment charges would apply. Breaking these down, an unauthorised payment charge of 40% of the 'relevant unauthorised payment value' (i.e. value of the asset in question) would apply to the member. In addition a 15% scheme sanction charge would be levied on the Administrator - hence the 55% total mentioned. In actual fact the possible charges could be higher still if certain limits are exceeded. While we can't comment on whether or not HMRC have levied such charges, it's important to note that the total charges are broken down into different amounts levied against different parties, meaning that there is not a single charge of 55%. What is clear however is that if a scheme is deemed to have made an 'unauthorised payment' then there are very penal tax consequences.
Since A-Day back in 2006 a number of life offices and other firms have dropped out of the SSAS market - with the effect of leaving a number of plans 'in limbo' with the SSAS members acting as sole Trustees and Administrators. As unregulated products there is no requirement for a professional Trustee or Administrator to be appointed for SSAS plans, although it may well be prudent. We see a SSAS as very much a three-way 'partnership' - the IFA, the SSAS members and us as Trustee and Administrator. This allows each party to focus on their own areas of expertise - i.e. the IFA on pensions and investments advice & planning and the member on their business - without having to worry about the mechanics of the SSAS, making reports to HMRC on time or ensuring investments are within the rules.
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