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Advisers back VAT clarity on rejected recommendations

HMRC Letter 480

Advisers have welcomed clarification from the Personal Finance Society and HM Revenue & Customs that advice will be VAT-exempt where product recommendations are rejected or no action is needed following a review.

The professional body has published a revised version of its Professional Direction paper on VAT and adviser charging, first issued in September after agreeing the guidance with HMRC.

Examples in the initial paper included where an adviser contacts providers for illustrations and makes a product recommendation, the client pays the agreed fixed fee for the work but takes no further action.

The PFS originally said this is likely to be VAT-able, saying: “Contacting a provider in order to provide information or an illustration is not a VAT-exempt act of intermediation by itself.”

In its latest guidance, the PFS now says this is likely to be exempt as the adviser has carried out the advice process with a view to arranging a sale.

The latest guidance also confirms where the client has signed up to a periodic review service, if the adviser recommends no action is required at review stage this is likely to be VAT-exempt as the review is an “ancillary part of the exempt supply of intermediation”.

Periodic reviews are exempt on the basis they are “a relatively minor element of the overall supply”, as first revealed by Money Marketing in October.

Ovation Finance managing director Chris Budd says: “The point about rejected recommendations needed to be clarified, as it would have been difficult to evidence the VAT treatment as first set out by the PFS. Common sense has prevailed.”

Sovereign IFA director Mark Hibbitt says: “I am pleased these issues have now been clarified.”


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