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HMRC: Consultancy charging not exempt from VAT


HM Revenue & Customs has confirmed advisers should charge employers VAT when levying a consultancy charge.

Consultancy charging rules were introduced by the FSA to allow advisers to take a fee from employees’ pension pots for advice given to their employer.

It had previously been unclear whether a consultancy charge would be exempt from VAT.

HMRC has now clarified that any adviser levying a consultancy charge will need to charge the employer VAT.

It says: “In order to fall within the finance or insurance exemptions, it is necessary for the provider to act as an intermediary (or one of the intermediaries) between the individual employees and the pension provider with a view to the conclusion of an individual pensions contract.

“Based on the typical contractual arrangements reviewed by HMRC and its discussions with the pension consultants industry this does not appear to be the position in respect of the services currently provided by pension consultants in return for ‘consultancy charges’.

“On the contrary, the ‘consultancy charge’ is a fee paid in return for advisory, administration and other services supplied to the employer. The fact that the ‘consultancy charges’ are paid via the pension provider does not alter the VAT analysis. The same VAT analysis also applies to any separate fees charged to employers.

“EBCs and other pensions consultants should therefore account for standard rated VAT on ‘consultancy charges’ and any separate fees charged to employers for these services.”

Aviva corporate benefits head of policy John Lawson says: “The warning to IFAs is that they might have felt consultancy charging looked and felt and smelt like commission, and so were not charging VAT on it.

“HMRC has made it crystal clear that if you aren’t charging VAT on consultancy charging, you should be.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Baffled beyond belief 18th April 2013 at 1:05 pm

    So hang on, you cant now “intermediate” with a corporate entity?? What are they talking about?!!
    A business client asks you to arrange a pension scheme. You “intermediate” and set up said scheme, in return for which you charge a fee, however payable. Surely that IS intermediation and no VAT applies? HOw confusing are they all trying to make our lives??

  2. I think the point HMRC are making is that the intermediary are providing a service to the employer, but the contract for the product is between provider and employee which the intermediary is taking no part in (I guess due to costs involved). presumably if your services involved administering the application of each individual employee to the scheme then you are involved in establishing the contract and meet the VAT exemption rules…

    agree it isn’t the most straight forward of things and imagine it would get slightly more muddied with AE services offered by EBCs…

  3. Whilst Group Pensions were not part of RDR, the issues have been on the cards for as long as RDR. Commission on GPPs hasn’t actually been banner yet, easiest thing to do would be NOT to ban it until a solution is found or is this how they want NEST to succeed? I am attending a NEST seminar on 30th in London and will decide after that whether to do as Ned Nayker suggests and start avoiding NEST and group business like the plague after that.

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