VAT may be applied to platform fees and rebates under the FSA’s rules on platform charging, according to Ernst & Young.
The company says the FSA’s definition of platforms as providing administration services rather than distribution services, as detailed in its November discussion paper, could have unintended tax implications.
In a report looking at the life and pension sector, published this week, E&Y says: “Since administration work is, in principle, a VAT-chargeable service, whereas distribution is exempt, we are concerned that the wording of the FSA’s rules on platform charging may lead to the application of VAT to platform fees and rebates.”
Fidelity International head of UK fund partners Ed Dymott says: “There is a material risk that if the final rules are written to focus on platforms as administration services, that VAT could apply to platform fees.
“It would be an incredibly poor outcome if the platform rules were written in such a way that they became less tax-efficient. One of the biggest elephants in the room over the RDR is the impact of tax.”
An FSA spokesman says: “This issue is exactly the kind of thing we expect to be fed back as part of the consultation process.”