VAT rise will put IFAs more out of reach
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Experts warn that the Budget’s VAT rise could put independent financial advice further out of reach of the mass market as IFA clients will pay 20 per cent VAT on the fees for advice they receive.
This week, Chancellor George Osborne revealed that the rate of VAT will rise from 17.5 to 20 per cent on January 4, 2011, creating £13bn worth of extra revenue.
Under the current rules, a firm that offers advice services as its main proposition, with sales as a secondary focus, must charge clients VAT. Transaction-focused services based on sales, with an element of advice, are exempt.
Technology & Technical founder and director Kim North says the increase in VAT will put true financial advice further out of reach of the mass market.
She says: “As the FSA pushes IFAs to have more transparent charging structures under the RDR, adding to the cost of financial advice will make it less attractive to people.”
Lansons public affairs director Ralph Jackson says: “The cost of advice is going to go up considerably. I wonder if the Treasury understands the impact that this will have on consumers. This could disincentivise advisers and clients from engaging with the advice process.”
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