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Advisers may de-reg over VAT guidance

Final HM Revenue & Customs guidance on VAT is likely to see some adviser firms cancelling their VAT registration as it will confirm their advice offering is outside of scope.

Attain Wealth Management de-registered from VAT in November on the advice of a tax specialist. Managing director Gordon Crothers says: “The way I have designed my firm is about building a service-driven business.

“With the amount of income coming in on a yearly basis, I thought I had no choice but to register for VAT.

“The tax expert told me he had just been speaking to a larger IFA and that he would tell me the same thing he told them, that I did not need to be VAT-registered.”
Until the company was de-registered, Attain covered the cost of the VAT liability so it did not charge clients VAT.

Advisers are awaiting final agreed HMRC guidance, expected later this month. Draft guidance sent to industry stakeholders in October stated that VAT would not apply where clients agree to take out an investment product following adviser recommendations.

The FSA branded the guidance contradictory as it suggested ongoing advice which includes portfolio rebalancing will be exempt from VAT but investment management or portfolio advice services will be subject to the tax.

Consultancy Engage Partnership has been liaising with HMRC. Director Chris Davies believes the final agreed guidance will prompt firms which have registered for VAT to consider de-registering.

He says: “We will see firms looking at this again once they get the final guidance through.”

Yellowtail Financial Planning managing director Dennis Hall was visited by HMRC inspectors two years ago and was assured that his firm was right to charge VAT. Hall now suspects the firm was given the wrong advice.

He says: “We think they have probably misled us. They probably do not understand everything involved and there are elements that we are charging VAT for that we might not have to charge for but not to the extent of becoming de-registered.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Is this the first real client benefit from RDR?

  2. veryconfused.com!!

    How can the FSA introduce all these new requirements (RDR etc) and, yet, not iron out these basics?

    i.e. is VAT chargeable or not?

    Strewth!!

  3. That’s all cleared up then…….

  4. Hector and his cronies must be really proud of their achivements under the RDR – £2billion cost to industry, lost jobs in provider firms, Fewer advisers, less clients getting access to advice due to imposition of mandatory fee charging and those that do seek advice may have an extra 20% to pay on top of the fee. No consumer detriment there then!!! WAY TO GO HECTOR!!!!!!!!!!!!!!!!! Thats a real winner. And this man is going to be the Deputy Govenor of the BoE? He has crippled an entire industry in his tenure at FSA and will end up crippling the country from his future position. In the name of all thats merciful someone in authority wake up, please wake up.

  5. No chance Marty he’s a Teflon man!

  6. I was advised to deregister 2 years ago by HMRC following a VAT inspection…… based on all the grey areas outlined above as being as treated as non vatable.

  7. Couldn’t have said it better Marty. Why do these people who don’t live in the real world with the rest of us, make rules that disadvantage the majority of the population and restrict people from getting good, sound, financial advice.

  8. God, another non story. The HMRC’s final views on this issue are not out yet, and in any case there is no simple ‘yes it is VATable’ or ‘no its not’. It’s down to each individual case.

    And if you think FSA are tricky people, wait till the VAT boys turn up on your door. They make FSA enforcement look like nuns!

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