ABSTRACT
A small self-administered scheme is a self-administered scheme which, as you would expect, has only a small number of members. Such a scheme may be approved by the Inland Revenue under its discretion, which is subject to Regulations (see the Retirement Benefit Schemes (Restrictions on Discretion to Approve) (Small Self-Administered Schemes) Regulations 1991 (SI 1991/No 1614). The Practice Notes on Approval of Occupational Pension Schemes (IR 12 1991 20.1-20.46) concern themselves in detail with this form of scheme. The regulations define a small self-administered scheme as one with less than 12 members where at least one of those is ‘connected’ with another member or with a trustee or employer connected with the scheme (see Regulation 20.1). The Revenue may also stipulate that a scheme with 12 or more members is to be treated as a small self-administered scheme which is obliged to comply with the relevant requirements set out in the Practice Notes, eg a scheme set up primarily for a few family directors to whom are added some relatively low paid employees with a low level of benefit to make up the membership to 12 or more. By contrast, it will be unnecessary to apply the small scheme regulations to a scheme consisting of less than 12 members if all members are at arm’s length from one another, from the employer and the trustees. The word ‘connected’, as used in the regulations, determines both whether the scheme is small and hence within the meaning of the regulations and in addition (inter alia) whether the application of the restrictions imposed apply (Regulations 2(3)–(9)). The definition of the term ‘connected’ is fairly comprehensive, and is based on the definition of ‘connected persons’ for the capital gains tax and inheritance tax legislation. Relatives are connected, eg brother and sister, husbands and wives and their relatives are connected, and a scheme member is to be treated as connected with the employer if the scheme is a partnership and the member is connected with one of the partners. It should be noted that Regulation 2(1) of the 1991 Regulations require that some or all of the income/assets of the scheme must be invested, otherwise than in insurance policies.
