i-Creation 2020 Ltd v The Pensions Regulator

The reference is dismissed, and the matter is remitted to the Respondent. The Fixed Penalty Notice is confirmed.

i-Creation Limited (‘the Employer’) challenges a Fixed Penalty Notice issued by the Respondent (‘the Regulator’) on 6 September 2023 (Notice number 117192266460).

The Fixed Penalty Notice was issued under section 40 of the Pensions Act 2008 (‘the Act’). It requires the Employer to pay a penalty of £400 for failing to comply with a Compliance Notice dated 10 July 2023 that required the Employer to provide the Regulator with information in respect of automatic enrolment.

The Regulator completed a review of the decision to impose the Fixed Penalty Notice and informed the Employer on 21 September 2023 that its decision was confirmed.

On the same day, 21 September 2023, the Employer referred to the Tribunal the Regulator’s decision to issue the Fixed Penalty Notice.

The parties and the Tribunal agree that this matter is suitable for determination on the papers in accordance with rule 32 of The Tribunal Procedure (First-tier Tribunal) (General Regulatory Chamber) Rules 2009, as amended. The Tribunal considered all the evidence and submissions made by both parties.

The Act imposes various legal obligations on employers in relation to the automatic enrolment of certain ‘jobholders’ into occupational or workplace personal pension schemes. The Regulator has statutory responsibility for securing compliance with these obligations and may exercise certain enforcement powers.

Since 1 October 2017, automatic enrolment duties apply to employers from their ‘duties start date’ (being the date when the legislation first applies to that employer). These duties include the obligation - from the employer’s duties start date - to assess their staff, write to them, and automatically enrol them into a qualifying scheme if applicable.

The employer must, within five months of its duties start date, provide certain specified information to the Regulator about its compliance with these duties. This is known as a ‘declaration of compliance’.

Crucially for the purposes of this case, the employer must also - every three years from its duties start date - assess and re-enrol eligible staff who have left the workplace pension scheme. The employer must then provide the Regulator with re-enrolment information by means of a ‘re-declaration of compliance’.

If the employer fails to provide a re-declaration of compliance, the Regulator can issue a Compliance Notice and then, if that Notice is not complied with by the stated deadline, a Fixed Penalty Notice can be issued for failure to comply with the Compliance Notice. The prescribed fixed penalty is £400.

Under section 44 of the Act, a person who has been issued with a Fixed Penalty Notice may make a reference (i.e. an appeal) to the Tribunal provided an application for review has first been made to the Regulator.

The role of the Tribunal is to take account of the evidence before it, and make its own decision on the appropriate action for the Regulator to take. The Tribunal may confirm, vary or revoke a Fixed Penalty Notice and when it reaches a decision, must remit the matter to the Regulator with such directions (if any) required to give effect to its decision.

The Employer made previous declarations of compliance in March 2017 and February 2020.

At that time, the same individual (AJ) who submitted the Notice of Appeal in this case was a Director of the Employer (then called Ooh-AR Limited) and it was he who completed the declaration of compliance in 2017.

Each of the Regulator’s acknowledgements of declaration of compliance in 2017 and 2020 stated ‘You will be required to re-enrol certain staff into a pension scheme and re-declare with the [Regulator] in approximately three years’ time.’

The Employer’s deadline for its re-declaration of compliance was 30 June 2023.

As the Employer did not file a re-declaration of compliance by 30 June 2023, the Regulator issued a Compliance Notice dated 10 July 2023 to the Employer’s registered office address at c/o D P C Stone House, 55 Stone Road Business Park, Stoke-on-Trent, Staffordshire ST4 6SR).

The Compliance Notice was marked ‘DO NOT IGNORE THIS COMMUNICATION’ and headed ‘I-CREATION 2020 LIMITED must comply with the directions in this notice by 21 August 2023. You may be issued a £400 penalty if you fail to comply by this deadline’.

The Employer did not file a re-declaration of compliance as required by the Compliance Notice. As a result, on 6 September 2023 (two weeks after the extended deadline given by the Compliance Notice) the Regulator issued a Fixed Penalty Notice – again addressed to the Employer’s registered office. This Penalty Notice required payment of the fixed penalty sum of £400 by 4 October 2023, and compliance with the Compliance Notice by the same date.

On 18 September 2023, the Employer completed the re-declaration of compliance – and on the same date emailed the Regulator asking for a review of the Penalty Notice. The email explained that:

On 21 September 2023, the Regulator notified the Employer that it had noted the Employer’s reasons for requesting a review, and the fact that it had since submitted the re-declaration of compliance. However, the Regulator had completed a review of its decision to issue the Fixed Penalty Notice and confirmed that decision meaning the penalty is still to be paid.

The Employer’s Notice of Appeal dated 16 October 2023 says that:

In its response dated 28 November 2023, the Regulator gave the following reasons for opposing the Employer’s reference of this matter to the Tribunal:

Taking account of all the evidence provided to me, I conclude that the Employer has given no ‘reasonable excuse’ for non-compliance in this case. My reasons are set out below.

There is no legal requirement for the Regulator to provide any reminders to employers: ultimately, it remains the Employer’s duty to comply with all their pensions obligations whether reminded of them or not.

In this case, a Compliance Notice was sent in July 2023 which the Employer seems to suggest was not received – though does not deny that the Fixed Penalty Notice was received. Even if the Compliance Notice was not received, the Regulator – having sent it to the correct registered office address (which to this day remains unchanged) – is entitled to rely on the statutory presumptions of proper service and receipt unless there is strong evidence to the contrary. No evidence to the contrary has been provided in this case.

Only after the extended deadline granted by the Compliance Notice had passed – and indeed only after the Fixed Penalty Notice was served (meaning the Employer had had over seven months rather than five months to comply) – did the Employer submit a declaration of compliance.

The reasons given by the Employer in its review request to the Regulator and Notice of Appeal to the Tribunal (summarised in paragraphs 21 and 23 above) indicate that the Employer was not well aware of its auto-enrolment obligation to submit a declaration of compliance.

While I have some sympathy with the Employer’s claim that the Compliance Notice was not received, as a responsible employer he should have been aware of the need to submit a declaration of compliance long before Compliance Notice was issued extending the deadline from 30 June 2023 until 21 August 2023.

The Regulator’s acknowledgements of receipt of the declarations of compliance in 2017 and 2020 both explicitly stated the need to re-enrol employees and re-declare compliance in three years’ time.

It appears from Employer’s mention of a ‘pensions adviser’ (as well as a pensions provider) that the Employer may have engaged a third party to assist with pensions issues. While the Employer remains responsible for fulfilling the statutory duties of an employer, if a pensions adviser was engaged to assist but did not provide the necessary standard of professional skill and care, thereby resulting in loss to the Employer, it is open to the Employer to take steps against that adviser.

The acts and/or omissions of a third party does not, however, provide a reasonable excuse for the Employer’s failure to comply – in full and on time – with all statutory obligations, including the need to submit to the Regulator a re-declaration of compliance.

The declaration of compliance is an important tool to enable the Regulator to check that employers are complying with their legal obligations. While the Employer argues that compliance was achieved immediately on becoming aware of the requirement, this cannot in law amount to a reasonable excuse for the previous failure to comply on time. Were it otherwise, employers might adopt a casual approach to compliance deadlines in the hope or even expectation that late compliance would enable a penalty to be overturned.

In all the circumstances, I therefore determine that the Regulator was entitled to issue a Fixed Penalty Notice on 6 September 2023 for non-compliance with the Compliance Notice dated 10 July 2023.

The amount of the penalty is fixed by law, so neither the Regulator nor the Tribunal has any power to reduce the penalty below £400.

However, the Regulator is able to accept the payment of penalties in instalments if a single payment will cause particular hardship. Should the Employer advise the Regulator that one single payment would cause financial difficulties, the Regulator may be willing to consider repayment options.

I confirm the Fixed Penalty Notice, and I remit the matter to the Regulator.

No directions are necessary.