HMRC to simplify adviser charging rules for annuities
HM Revenue and Customs is set to issue new draft guidance that simplifies the way adviser charges for annuities are treated so that charges related to the implementation of advice are not considered to be an unauthorised payment.
Current HMRC guidance on adviser charging, available on the revenue’s website, states that the payment of charges to meet generic financial advice costs would not be considered an unauthorised member payment.
This exclusion covers advice related to “the suitability of fund choice, asset allocation, pension provider, pension taxation or checking against statutory limits”, but does not cover costs for implementation fees such as costs for switching from one fund to another within a scheme.
In new draft guidance, seen by FTAdviser, both generic advice and costs related to the implementation of advice are considered to be authorised member payments and therefore would not give rise to unauthorised tax charges.
The draft rules state that payment of management fees to meet pension advice costs would not be an unauthorised payment provided the management fees are paid as a result of “genuinely commercial remuneration arrangements between the member and financial adviser” and that the remuneration “is commensurate with the advice given”.
A spokesman for HMRC said that while he could not comment on the draft rules, the revenue is looking to simplify the current guidance and is planning to publish new rules by June.
Reports earlier this year suggested that talks were ongoing between HMRC and industry bodies over previous guidance which suggested that adviser charges for clients that changed provider after shopping around for an annuity would have to be paid by both the original and new provider.
According to the reports, this would have meant that a client’s new provider would have to request the original provider to pay a portion of the charge from the client’s tax-free lump sum, but that HMRC had said it would review this when it issued new guidance.