The parent company IFG Group said today it is contesting the sanctions from the tax man and has lodged an appeal.
The legal dispute surrounds claims of unpaid tax on biofuel scheme investments.
A stock exchange notice this morning revealed that the firm has been told to pay sanction charges of £1.8m for the 2011/12 and 2012/13 tax years.
Around 500 of James Hay's 57,000 clients invested a total of around £55m in Elysian Fuels, which HMRC is investigating as a non-standard investment. This was a structured investment in biofuel businesses initiated between 2011 and 2015, an equity component of which was held by some investors through their Sipp.
IFG Group stated: “James Hay did not advise investors in relation to these investments; it acted solely as pension administrator.
“The extent of any ultimate exposure to the group is uncertain at this stage, and may in any event be mitigated by indemnities available to us.
“Sanction charges can be levied by HMRC on Sipp providers where there is deemed unauthorised payments, the amount of which is dependent upon the individual circumstances of each investor.
“We believe James Hay acted appropriately and in accordance with its clients' instructions in relation to these investments. We will be incurring ongoing legal costs in relation to this issue.”