Industry experts have warned HMRC of inadvertent damage to the pension advice market and other broader unintended consequences in their responses today (16 June) to the UK tax office's consultation on raising standards in the tax advice market.
The Association of Consulting Actuaries (ACA) welcomed the initiative to improve standards but made it clear that this should not be at the expense of inadvertently damaging the pension advice market or the provision of high-quality information to scheme members.
ACA chair, Patrick Bloomfield, said: "HMRC is looking to find an extremely wide definition of ‘tax advice'. This is understandable as it means promoters of tax avoidance schemes cannot hide behind a label of offering ‘guidance' rather than ‘tax advice'.
"However, given the complexity of pensions tax rules, such a definition could inadvertently capture a wide element of the industry helping the day-to-day delivery of pension schemes. This could significantly inconvenience scheme members and bring pensions professionals into regulations primarily designed with traditional tax advisers and their clients in mind."
ACA pensions tax committee vice-chair, Tim Sexton, added: "ACA is also concerned it could become difficult to communicate with trustees, employers or members effectively without encroaching on a wide view of tax advice. Any policy regulating tax advice should not interrupt the high quality advice given by pension professionals, interfere with the good running of pension schemes, or interfere with the Pension Regulator's aim that pension schemes give members as full as possible information to understand their rights and options."
HMRC has proposed in the consultation using professional indemnity insurance (PII) as a tool which might remove some advisers from the market, and then provide fallback for compensation to customers who suffer from badly given tax advice.
But the ACA argued that if HMRC intends to make PII cover mandatory across the very diverse range of advisers who comment on tax matters to clients then the policy should:
The Society of Trust and Estate Practitioners (STEP) was also among those to respond to the consultation, arguing that HMRC should be as specific as possible as to what it considers constitutes ‘tax advice'.
"However if HMRC is seeking a wider definition then we are mindful that it may be more suitable for HMRC to consider what constitutes ‘tax services' as not all tax services are "advice" For example, financial advisers may give general guidance on estate planning issues which clients may then wish to follow up with other advisers, but are very clear that they are not giving any tax advice.
STEP suggested adopting a narrower definition, giving tax advice in its natural meaning could cover the following:
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