Pension administrators could inadvertently be included in the scope of HMRC’s proposals on raising standards in the tax advice market, the Pensions Administration Standards Association (PASA) has warned.

Responding to HMRC’s consultation Raising standards in the tax advice market – strengthening the regulatory framework and improving registration, PASA said pension administrators carrying out non-advisory administrative functions, such as collecting and paying tax on pensioner payroll, could be affected.

It warned that this would have implications for its members, including third-party administrators, pension providers, and in-house pension schemes.

HMRC’s consultation asks for views on two proposals: Mandating registration for tax practitioners who wish to interact with HMRC on behalf of their clients and the requirements that HMRC should establish to enable registration; and options for strengthening the regulatory framework for either all tax practitioners or those interacting with HMRC.

These options were set out in three potential approaches: Mandatory membership of a recognised professional body that supervises their professional standards; joint HMRC-industry enforcement of tax practitioner standards; or regulation of tax practitioners by a government body.

The association said that pension administrators do not provide tax advice but interact with HMRC in carrying out non-advisory administrative functions.

HMRC was urged to consider how its proposals interact with other government departments, such as The Pensions Regulator (TPR), as there was a risk of regulatory bodies overlapping each other.

While HMRC stated it intended to exclude professionals who are regulated in accordance with TPR, the Financial Conduct Authority, and Institute and Faculty of Actuaries, among others, some non-tax practitioners were likely to be in scope unintentionally.

“The precise wording of any exemption will be critical to the industry to avoid a compliance issue,” PASA stated.

“The scope is too wide as pensions administrators will be caught within the scope when they are not giving tax advice but merely carrying out a non-advisory administrative function.

“There are many reasons for interaction with HMRC and some are merely administrative in nature rather than giving true tax advice. The requirements should be refined further to ensure such activities are not included within the proposals.”

It called for pension administrators and business process outsourcers to be excluded from the proposed requirement, and said the proposed exclusions should be considered further to take account of pension administrators.

Additionally, PASA said that administrative services should be outside of scope of the requirement to become a member of a professional body.

HMRC also asked what the consequences of introducing a legal definition of a provider of tax advice and services would be, with PASA stating: “It’s difficult to answer until the legal definition proposal is completed. If judged heavy, it could lead to some administrative service providers withdrawing form service provision due to additional costs on slim margin businesses.”

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