Former Origen chief executive Gareth Marr is lobbying the Treasury and FSA to give tax relief on fees for pension advice.
Marr says the FSA’s distribution review needs to look at tackling the bias towards commission over fees caused by tax relief and VAT to create a level playing field for adviser remuneration.
Marr says this occurs because fees for advice not leading to a direct sale are liable for VAT but this is not the case for advisers remunerated by commission or fees connected with arranging a product.
He says pension advice creates greater bias as tax relief is effectively given if the advice is paid for by commission paid from an approved policy.
He says it would be difficult to amend the VAT system as it comes under European legislation but allowing tax relief on fees for pension advice and changing the tax treatment of commission could make the two choices neutral.
Marr says: “If the level playing field is created, it would undoubtedly lead to a growth in fee-based advisers. This is what the FSA wants to happen in the retail marketplace.”
A Treasury spokesman says: “VAT treatment is not a question of whether payment is based on commission or fees. Rather, VAT treatment is determined by the type of supplies provided. In this case, this supply is financial advice.”