Moret: Letting Freedom Sipp clients pick up £66m tax bill is not TCF

Suffolk Life has argued that allowing Freedom Sipp customers to be hit with a £66 million tax bill following the wind down of the scheme is against treating customers fairly (TCF).

A judgement in the High Court yesterday ruled Freedom Sipp would be wound down after HMRC brought a case against the provider for failing to pay tax.

It is now in the process of being liquidated and is thought that HMRC will de-register the scheme, triggering a 40% tax charge on the assets, equivalent to £66 million based on £165 million of assets held in the scheme and last counted in February.

John Moret (pictured), director of sales and marketing at Suffolk Life, challenged the regulatory standards, arguing that it went against the Financial Services Authority’s (FSA) TCF principles by allowing Sipp customers to be penalised for an administrative failing.

 ‘There is uncertainty over whether some or all of the tax charges will be levied but to penalise the Sipp investors seems very harsh and hardly consistent with TCF.’

‘If it is fit for purpose then how did we arrive at today’s situation? By initially concentrating their resources on larger Sipp providers did the FSA allow smaller providers too much freedom in the early days of regulation? Was the original regime for establishing a Sipp under which a provider of substance was needed-rather than simply a regulated operator a better framework?’

Calling for a review of Sipp regulation, Moret added that the length of time between initial complaints made about the Freedom Sipp and FSA action had only compounded matters.

‘It isn’t clear why there was such a long period between the FSA’s first supervisory notice issued on 3 July 2008 following a complaint from an investor and the FSA’s letter of 28 July 2009 to all investors… It is surprising that Freedom where allowed to continue to operate for so long,’ said Moret.

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