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Advisers’ charges to escape VAT

The RDR paper has clarified that the new style of adviser charge will not carry VAT.

The FSA acknowledged that there was debate with advisers concerning whether an adviser charge could have been construed as a chargeable service by the taxman with VAT levied. But the feedback statement confirms that VAT will not be added.

It says: “Some firms have queried whether advisers’ charges would automatically be subject to VAT if they were set by advisers rather than paid for by commission.

“It is our understanding that this is not the case: whether adviser charges are subject to VAT is not determined by whether payment is by fee or commission, but is determined by the nature of the service provided.”

As yet, there are no clear definitions of where VAT should and should not be paid with regard to advice.

The regulator has admitted that it will be liaising further with HM Revenue & Customs with regard to tax and adviser fees ahead of its consultation next year.

It says that it will be possible after this to clarify the situation fully.

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