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Topics: HMRC| trail commission| Pension
Entrepreneur Ivan Massow, fresh from launching his new venture which aims to refund 'unearned' trail commission to retail customers, said he is confident the process does not fall foul of HMRC tax rules where it involves pension plans.
Advisers said refunding commission to clients from a pension plan would likely be treated as an 'unauthorised payment' by the UK's customs and tax department, resulting in a minimum 40%, and possible 55%, tax charge.
But Massow said as no 'new' commission is being generated and the rebate is purely a 'commercial arrangement', he has confirmation that the rules do not apply.
His new business - paymemy.com - launched yesterday. It allows clients who discover they are paying renewal commission but receiving nothing in return to apply to get 80% of any future payments rebated to them.
All customers need to do, Massow said, is switch servicing agent to his company and let it track down and refund the money, although it will keep 20% for its efforts.
Advisers have questioned his overall objectives and approach, but specifically they argued it was unlikely HMRC would permit such payments from pension schemes without levying a charge.
But Massow said his company is "simply collecting an ongoing expense" which was due to the original adviser regardless, and rebating this where the amount is disproportionate to the work it undertakes.
He added he had been told by HMRC that, as the unauthorised payment rules had been set up to prevent policyholders setting up pension schemes where they receive a large kickback in commission at outset, his offering was exempt as it did not seek to, or achieve, this.
A spokesperson for HMRC said: "Whether or not rebates of commission in respect of a pension scheme would be authorised payments would depend on the facts of the case and in particular whether the commission can be treated as scheme administration payments.
"Upfront adviser charges paid out of a registered pension scheme as commission or as fees are likely to be treated as scheme administration payments. This will also be the case in respect of adviser charges for ongoing advice.
"But the payments will be unauthorised payments if the arrangements they are paid under are not wholly commercial or if the costs are not just for pension advice about the particular pension scheme."
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a change of policy from HMRC?
I doubt it - this stinks of the HMRC spokesperson not understanding the question and someone hearing the answer they wanted to hear. Good luck to anyone getting involved in this - it's got unauthorised payments written all over it.
Posted by: Nigel Bennett
Enjoyment
Massow is IFA baiting - with is fun to watch as so many of us appear to worry that our clients don't value us. Personally I'm relishing the moment when this goes 'tits up' as Massows other businesses have done.
Posted by: Chippy Minton
RDR
I'm guessing that Massow hasn't heard of the RDR? This business may have 18 months to go and not a lot longer.
Posted by: Windy Miller
Is this going to cost us via the FSCS
If Mr M has got this wrong and a client looses the tax status of their pension as a result of a pension kick back and the client then claims against the "non advice" givne my Massows, other the consuemr will loose out because they will not pay for the error/loss OR if a claim is upheld, will Massows then collapse leaving the FSCS to pick up the tab? Perhaps this is one for the FSCS to look at as surely they have a responsibility to look at whether actions are likely to result in this occuring. Or is it more important for the nteworks to look at it? Ot perhaps even the IMA in case like Keydat it overflows and affects them. If we are talking pension funds, we could be talking large sums.... There has got to be a better way of doing this such as the provider rebating the commission to the plan or something.
Posted by: Nameless
Not new
This concept isn't new. See www.gofifty50.com Under their FAQs a pension cannot be accepted
Posted by: Martin Brown
He's playing the PR game again !
This guy has always been good at PR and is again leading the journalists a merry dance. His business was NEVER the 10th largest IFA in the UK, just see the New Statesman for a better view of his businesses. He is a failed IFA, who sold his supposed £20m business (no one other than him ever said it was worth £20m), depending who you believe, to his staff for £100 or his arch enemy Zurich (Allied Dunbar) for a mere £300k golden hello who he then sued for £13m and lost. He was a Tory candidate for London (failed), changed to true red Labour, then back to Tory I agree our business can be dull and needs some characters, but a bit of investigation would show all is not as it appears - again
Posted by: GH
Who is he trying to convince..?
He can pay the money back into the customers pension (he doesn't have clients by definition), but if he pays it to the customer directly then the customer will be "benefitting from the pension before being entitled". I agree with others comments about the dangers of this from HMRC...and the prospect of the FSCS being involved if he does (another) Titanic with a Massow business venture.
Posted by: Brian
Who is he trying to convince..?
He can pay the money back into the customers pension (he doesn't have clients by definition), but if he pays it to the customer directly then the customer will be "benefitting from the pension before being entitled". I agree with others comments about the dangers of this from HMRC...and the prospect of the FSCS being involved if he does (another) Titanic with a Massow business venture.
Posted by: Brian
What is commission?
This case highlights the problem with calling commission "cost of advice". Commission is a cost to the product provider for marketing, distributing and maintaining a product. IFAs are either in this loop or out of it, but whether in or out the cost to the product provider remains, otherwise the product would never get to the customer...
Posted by: Ken Durkin
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