Alliance Trust Savings is scrapping VAT on its platform charge for Isa and investment accounts from May.
The move follows draft guidance published by HM Revenue & Customs last month.
Money Marketing revealed in October that HMRC was consulting on the tax treatment of platform charges, with initial fears platform charges would be subject to VAT.
HMRC’s draft guidance signalled that VAT would not be imposed on platform charges following industry negotiations. Money Marketing revealed last month that ATS was reviewing the application of VAT on its fees.
ATS director Patrick Mill says: “We are delighted to announce that from 1 May, we will no longer charge VAT on our Isas and dealing accounts.
“In a market that continues to be heavily dominated by providers who charge customers a percentage of their overall savings, the changes we are announcing today, combined with our flat fee charges, will mean that our customers will be getting even more value for money.
“We believe this, coupled with our ongoing price guarantee, further strengthens our proposition for customers.”
The platform announced increased charges in January with a pledge to freeze them until 2016. The removal of Vat sees its quarterly custody charge shrink from £22.50 to £18.75.