Legislation introduces a legal requirement for tax advisers who interact with HMRC on behalf of clients to register and meet minimum standards
There is a “tangible risk” that pension professionals could be caught up in HM Revenue & Customs (HMRC) rules on tax advisers, the Society of Pension Professionals says.
The industry body said draft Finance Bill measures published by HMRC introduce a legal requirement for tax advisers who interact with HMRC on behalf of clients to register with HMRC and meet minimum standards.
The SPP stated that, while it welcomed proposals to monitor and enforce minimum standards for tax practitioners, it had two key concerns with the legislation – the proposed definition of "tax adviser" and therefore the scope of the legislation and the current omission of any exemption for pension professionals.
It said the draft legislation brings into scope anyone who provides assistance with any document that is likely to be relied upon by HMRC to determine another person's tax position – even if the organisation for whom the work done is "appointed indirectly or at the request of someone other than the client".
The SPP noted this meant that actions taken as part of general pensions administration by a firm appointed by trustees as a third-party administrator could fall into scope of this legislation by virtue of the information provided to members such as pension savings statements and information about relevant benefit crystallisation events.
It said other information about tax provided by schemes as well as general member education might also be brought into scope.
More broadly, the SPP said the drafting of the legislation might bring into scope "a whole range of individuals and firms" who not really performing as tax advisers but may be in scope simply because they provide basic assistance that mentions tax.
The SPP said it believed that purely ancillary tax assistance should be excluded from the scope of the new rules – noting that, without some other test to limit the scope, it believed that there may be a number of unintended consequences of drafting legislation so broadly.
The SPP's response to the legislation said: "There is a very tangible risk of pensions professionals, who HMRC previously confirmed were not the intended target audience for these proposals, being inadvertently captured by the proposed new regulatory regime. With around 35 million pensions being administered in the UK, the potential impact of unintended consequences here is considerable."
The SPP also called on HMRC to implement an an exemption for pension professionals in the same way that payroll professionals have been exempted.
It said: "It is clear that the work of ordinary third-party pensions administration and basic member guidance should also be exempt from this legislation in the same way that those providing payroll or other tax or accounting software to a client have been granted an exemption."
It said the service delivered by pension scheme administrators is broadly equivalent to the work done by payroll professionals or those providing tax or accounting software in that they are complying with legal requirements on behalf of their trustee clients who appointed them.
The SPP said HMRC had recently indicated a willingness to consider further exemptions for such third-party administrative work – pointing to the exact areas that it thought needed to be changed.
It added: "The SPP suggests that an exemption be added to draft section 3(1) so that a tax adviser does not contravene section 2(1) where the adviser only interacts with HMRC as an authorised practitioner on HMRC's managing pension schemes service in relation to one or more registered pension schemes."
