Welcome to your weekly update from the Allen & Overy Pensions team, covering all the latest legal and regulatory developments in the world of occupational pensions.
This week we cover topics including: TPR reports on regulatory intervention with Sanofi; and HMRC challenges tax avoidance arrangements using unfunded pension obligations.
TPR reports on regulatory intervention with Sanofi
The Pensions Regulator (TPR) has published a regulatory intervention report about its involvement with the Sanofi Group and, in particular, the UK-based companies participating in the Sanofi Section of the UK pension scheme.
TPR’s concerns centred on the gradual erosion of the employer covenant supporting the scheme over a period of about 10 years due to multiple restructurings within the group. These had resulted in significant dividends being paid to other group companies and in a higher degree of reliance by the scheme’s statutory employers on inter-company balances (monies owed by other group companies that were not immediately available to those employers). TPR considered that the steps taken to date, including deficit repair contributions and guarantees, were not sufficient to mitigate the risks to the scheme.
Following investigations and use of its information gathering powers, TPR notified various target entities of its intention to issue a Warning Notice in relation to obtaining financial support directions. In response, the group brought forward proposals for a negotiated settlement which ultimately included a new guarantee package from Sanofi SA, the French parent company, including additional protection of up to £730 million in the event of insolvency in the next 20 years; a legally binding dividend-matching agreement; and an upfront contribution to the scheme of £37 million.
TPR comments that ‘meaningful settlement discussions can take place in parallel with our investigations… We will consider all credible settlement proposals that meet our statutory objectives, which include the protection of members’ benefits in occupational pension schemes and the reduction of the risk of calls on the Pension Protection Fund’.
Read the report
HMRC challenges tax avoidance arrangements using unfunded pension obligations
HMRC has published a note (Spotlight 58) as part of a series on current tax avoidance schemes, focusing on arrangements involving unfunded pension obligations created for the directors of owner-managed companies. The intention of the structure is to reward a director for services in a way that avoids paying income tax and National Insurance contributions, while obtaining corporation tax relief.
HMRC states that it will challenge anyone promoting such arrangements and investigate the tax affairs of all users. The note sets out tax charges, penalties and interest that may apply where it challenges arrangements such as these. HMRC will also pursue scheme promoters where appropriate.
Read the guidance