RPSM04301080 - Scheme Administrator Pages: Taxation: Tax and penalties payable by the administrator Penalties: More details about penalties

More Details about penalties

Penalties relating to fraudulence or negligence

There are number of penalties that the scheme administrator may be liable to relating to the 'fraudulent or negligent' provision of incorrect information or documents. It is clear what is meant by 'fraudulence' and this is, in any case, very rare. It is far more likely that penalties relating to 'fraudulence or negligence' will be as a result of neglect on the part of the scheme administrator.

Neglect is not defined in the legislation and covers a whole range of offences from those that only just fall short of fraud to simply carelessness. Neglect does not need intent so the fact that the scheme administrator did not intend to provide incorrect information or incorrect documents does not, in itself, prevent a penalty.

The Pension Scheme Return: Penalty provisions

If the scheme administrator of a registered pension scheme fails to comply with a notice requiring them to make and deliver a pension scheme return together with any accounts etc. within the time scale required by RPSM12301410, the scheme administrator is liable to an initial fixed penalty of £100.

If the failure continues after the initial £100 penalty the scheme administrator is liable to a further penalty of up to £60 a day while the failure continues. As soon as the failure is remedied no further penalties will be imposed in respect of that failure.

If the scheme administrator fraudulently or negligently makes an incorrect pension scheme return or delivers any incorrect accounts, statements or other documents with a pension scheme return then the scheme administrator is liable to a penalty of up to £3,000.

Registered Pension Scheme Event Reports: Penalty provisions

When the scheme administrator has to make an event report to HMRC it must be made within the time scale set out in RPSM12301020. If the scheme administrator fails to submit the report in respect of any reportable event by the required date then the scheme administrator may be liable pay an initial penalty of up to £300. If the failure continues the scheme administrator may be liable for further penalties of up to £60 a day. As soon as the failure is remedied no further penalties will be imposed in respect of that failure.

If the scheme administrator fraudulently or negligently makes an incorrect event return then the scheme administrator may be liable to a penalty of up to £3,000.

Penalty provisions for other requirements under the Registered Pension Schemes (Provision of Information) Regulations 2006

The same range of penalties as for the event report apply where the scheme administrator is required to provide information to a person other than HMRC. The occasions where the scheme administrator has to provide information to someone other than HMRC are included in

• RPSM12303000 for information to a scheme member
• RPSM12304000 for information following a member’s death
• RPSM12305000 for information to other scheme administrators
• RPSM12306000 for information to insurance companies

Registered Pension Scheme Record Keeping: Penalty Provisions

If the scheme administrator of a registered pension scheme fails to comply with the requirements to retain records as set in RPSM12300020 then they will be liable for a penalty of up to £3,000.

Notices issued by HMRC: Penalty Provisions

If, on receiving a notice from HMRC, a scheme administrator fails to provide the particulars or the documents, or at least sight of the documents, within the time period specified in the notice the scheme administrator is liable to an initial penalty of up to £300. If the failure continues after the initial penalty is imposed then they will be liable for further penalties of up to £60 a day while the failure continues. No further daily penalties will be imposed once the notice has been complied with.

If the scheme administrator fraudulently or negligently produces incorrect particulars, incorrect documents or makes incorrect documents available for inspection in response to a notice then they are liable to a penalty of up to £3,000.

Accounting return: penalty provisions

If the scheme administrator of a registered pension scheme is charged to tax under the provisions of Part 4 Finance Act 2004 and fails to account for the tax within the time scale set out in RPSM04300020, then the scheme administrator is liable to pay a penalty or, in some cases, penalties. The first penalty will be charged in respect of each quarter for which a complete accounting return is required but not made within the relevant time scale. The size of the penalty will depend on the number of persons in respect of whom particulars should be included in the return.

If the failure to make the complete accounting return continues into the following quarter then the scheme administrator will become liable to a second penalty calculated on the same basis and similarly for the third and fourth quarters.

If the complete accounting return has not been submitted by the end of the fourth quarter after it was due then the scheme administrator will become liable to a tax geared penalty. The size of the penalty will be up to the amount of tax to which the scheme administrator is liable other than amounts due in respect of the scheme sanction charge. However this tax-geared penalty can only be imposed after HMRC have determined the amount of income tax to which the scheme administrator is liable for the quarter and informed the scheme administrator of that amount.

The scheme administrator will be liable for the tax-geared penalty for the quarter in which the completed return should have been made.

If the scheme administrator fraudulently or negligently makes an incorrect accounting return then they are liable to a penalty of up to the difference between the amount of tax shown in the return and the amount that should have been shown in the return.

Winding up to facilitate payment of lump sums: Penalty provisions

Whenever a registered pension scheme winds up and HMRC consider that this has been done wholly or mainly for the purpose of facilitating the payment of winding up lump sums or winding up lump sum death benefits (or both) then the scheme administrator is liable to a penalty.

The size of the penalty will be up to £3,000 in respect of each member to whom a winding-up lump sum has been paid, plus up to £3,000 in respect of each member in respect of whom a winding-up lump sum death benefit is paid.

Transfers to insured schemes: penalty provisions

Where a transfer representing a member's rights under a registered pension scheme is made to an insured scheme then the scheme administrator of the transferring scheme must comply with the conditions set out in RPSM12305010.

If these conditions are not complied with the scheme administrator of the transferring scheme is liable to a penalty of £3,000.