Disclosure regime and Registered Pension Schemes

  1. From 1 August 2006 those promoting (and in some cases those using) schemes and arrangements designed to produce a tax advantage relating to registered pension schemes will be obliged to report these to HMRC.
  2. Tax advantaged schemes are notifiable if they fall within any one of seven descriptions ("hallmarks"). Four "generic" hallmarks target new and innovative schemes. One hallmark targets standardised tax products. Two hallmarks target known specific risk areas – loss schemes for individuals and finance leasing. These are set out in The Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006 (SI 1543/2006).
  3. Although all registered pension schemes will confer a tax advantage because of the tax reliefs available to them, pension schemes and their members who are merely enjoying those reliefs in normal ways are unlikely to be affected by these disclosure requirements because the arrangements will not be within any of these hallmarks. In particular, entering into a registered pension scheme based on standardised documentation will not be a reportable event.
  4. However the regulations will require disclosures from those who promote (and in some cases those who use) arrangements that are intended to exploit the rules surrounding registered pension schemes.

Who makes the disclosure

  1. Normally it is the promoter of the scheme who is required to disclose. But there are three circumstances in which the taxpayer must disclose:

* "in-house" schemes, i.e. where there is no promoter;

* where the promoter is offshore and does not disclose;

* where the promoter is a lawyer who is prevented from making a full disclosure of the required information by legal professional privilege (LPP). The client may, however, waive privilege, in which case the lawyer is required to disclose.

Timing of disclosures

  1. In general, disclosure must be made within five working days of the scheme being made available for implementation or when the first transaction to use the scheme takes place. Users of in-house schemes were initially allowed to disclose on their tax returns. From 1 August 2006 the time limit for disclosing an in-house scheme is reduced to within 30 days of the first transaction to use the scheme.

Reference numbers

  1. The rules provide that the HMRC may issue a reference number for any scheme disclosed within 30 days of receipt of the disclosure. Where HMRC issues a number to a promoter, the promoter must provide this to clients within 30 days of the later of:

Becoming aware of the first transaction to use the scheme; or if later

Receipt of a reference number from HMRC.

Further obligations on users of a disclosed scheme

  1. A person who uses a scheme who has been issued with a reference number, either by the promoter or directly by HMRC, must declare that number on each self assessment return that is affected by the scheme.

Penalties

  1. A promoter who fails to disclose scheme etc will be liable to an initial penalty of up to a maximum of £5,000. Where after this initial penalty is imposed the failure continues then a further daily penalty of up to a maximum £600 per day will be imposed.
  2. Promoters who fail to give a registration numbers to their client will also be liable to a maximum penalty of £5,000.
  3. Taxpayers who fail to show scheme registration numbers on returns will be liable to an initial penalty of £100 rising to £500 and then £1000 for subsequent failures.
  4. In respect of both promoters and taxpayers, initial penalties will be determined by the Special Commissioners and there will be a right of appeal against the imposition of the penalty.

Guidance

  1. Full guidance on the disclosure regime is available.