View more on these topics

Europe ruling expected to recommend exempting DFMs from VAT

An upcoming opinion statement from the European Court of Justice is expected to recommend discretionary management services should be exempt from VAT, which would lower fees for investors but could push up costs for DFM providers.

Under the VAT Act 1994, discretionary services are subject to VAT but dealing fees and commission involved in discretionary services are exempt.

Last year, a German court questioned Deutsche Bank’s VAT treatment of its discretionary services and referred the case to the ECJ for guidance.

The case was heard in the ECJ on March 1 and an opinion statement from advocate general Sharpston is expected on May 8. It will then be referred back to the original German court for a decision. In most cases, courts will follow the guidance set out by the advocate general. In January, HM Revenue & Customs said the Deutsche Bank decision could inform its VAT policy on discretionary investment services.

Grant Thornton UK director of indirect taxes Stuart Brodie says the expectation is that all discretionary investment management will become exempt. He says the end-investor would benefit from cheaper fees, but DFM providers would no longer be able to recover VAT on their business costs.

Providers may face additional costs if a client asks for a refund on the VAT they have paid. Investors can retrospectively claim back incorrectly paid VAT from firms up to six years before the rules changed but businesses can only reclaim VAT from HMRC to refund investors for up to four years, after which time the business has to cover the cost of the refund.

Brodie says: “It would be a total game-changer from the HMRC’s current position. It would mean everybody involved in the industry would have to revisit the VAT liabilities they are applying.”

Bloomsbury Financial Planning partner Jason Butler says: “An exemption would bring the treatment of discretionary services into line with other funds.”


MPs in amendment bid to publish BoE minutes

The Treasury select committee has tabled an amendment to the Financial Services Bill which would require the Bank of England’s court of directors to publish its minutes. It comes after the TSC and the bank clashed over the committee’s request for it to release minutes from court meetings during the financial crisis. The bank said […]


ARM investors call for scrutiny of bid proposals

A group of investors in troubled life settlement vehicle ARM Asset Backed Securities wants to be able to scrutinise each proposal from prospective buyers of the fund to ensure the best offer is put to a bondholder vote. Luxemburg-based ARM issued bonds based on life settlement policies without the appropriate permissions. The bonds were sold via […]

Principality Building Society restricts interest-only

Principality Building Society is restricting its interest-only offering to just three products. The Welsh lender is still offering interest-only or part interest-only deals up to 85 per cent LTV. Its 85 per cent LTV deal is available on a three-year discount rate, with a discount of 0.3 per cent from its SVR, currently 4.99 per […]

FTSE opens flat despite Asian falls

European markets have been steady in early trades on Wednesday despite overnight losses in Asia. At 9.44, the FTSE 100 was up 0.1 per cent to stand at 5,597.12 while in Europe the French Cac 40 and the German Dax were up 0.4 and 0.7 per cent respectively. Continued worries in the eurozone coupled with […]

How can I help develop my professional connections?

Graeme Ballantyne, business consultancy manager, looks at how you can maximise the opportunities through your professional connections As we move through the summer months it’s perhaps a good time to pause and reflect on whether the plans you’ve made for your business are bearing fruit. One area we at PruConsulting know many advisers have been […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm