Advisers have said they are being left in limbo by HM Revenue & Customs in-specie contribution review, as the Association of Member-Directed Pension Schemes confirmed it is in talks with the taxman on the issue.
In-specie contributions are where ownership of assets are transferred from one person or entity to another in its current form, so they aren't converted into cash.
On pension contributions the asset holder is entitled to tax relief in the normal way.
But HM Revenue & Customs may be changing its stance on in-specie contributions.
As a result the industry has stopped accepting in-specie contributions until the situation is clarified.
In April this year HM Revenue & Customs introduced a new form that included a tick box the pensions administrator fills in to say whether the claim for that month includes any in-specie contributions.
Robert Graves, head of pensions technical services at Rowanmoor, said since then, HM Revenue & Customs has asked any firms that have ticked the box because they did have some claim relating to in-specie contributions to see the details of the transaction.
"[HMRC] are finding fault with the process, which we thought was agreed, and are refusing the tax relief," he said.
FTAdviser understands Amps is taking legal advice on the matter, as the current practice since pension simplification in A-Day in April 2006 is not legislation, but an industry agreed interpretation of the rules around in-specie contributions.
Dean Mullaly, managing director at London-based Mark Dean Wealth Management, said a change to the process would cost more money for consumers.
He said: "This would severely disadvantage the client because if the Revenue do not allow in-specie contributions then the consumer has got to sell the asset where it is at the moment, which will incur trading costs when they rebuy it."
Mr Mullaly added such a transaction could incur a dilution levy and transfer charges for cash, and could void the the reason clients use in-specie processes - to avoid being out of the market for any period of time.
"It will cost more money as a consumer. There will be loads more trading costs, market volatility means clients could end up winners if markets go down or losers if markets go up. The unknown consequence of the Revenue doing this is that clients are paying more."
Mr Mullaly said this was incongruous with the Financial Conduct Authority's principles around treating customers fairly.
Mr Graves told FTAdviser worried advisers had been coming to him with questions on in-specie contributions.
He said: "As far as I’m aware, it is an Amps recommendation really to say be wary of taking in-specie contributions because the Revenue are taking issue with what we thought was an agreed process that allowed you to claim tax relief.
"But if HM Revenue & Customs are now challenging that process it would be risky for firms to accept in-specie contributions until Amps can clarify what those issues are."
He also pointed out that it was a "real shame there is a red tape issue going on forcing people to go through a long winded route."