View more on these topics

HMRC guidance clarifies VAT fee stance

The Association of British Insurers and HM Revenue & Customs have reiterated that VAT is only payable on advice, not on the sale of a product, in new guidance.

The guidance, on the tax treatment of adviser remuneration, states that where the customer wishes to recieve advice only, for example they request a valuation of current pension arrangements to decide if they should make additional contributions, VAT will be due.

This also applies to investment advice.

But where the customer wants their adviser to arrange the purchase of a financial product, this transaction will be exempt from VAT, the guidance says.

The service of arranging life, pensions and investment products and mortgages is exempt from VAT. The note adds that the exemption applies whether the adviser is paid in fees or commission.

If the customer wants advice and buys a product, IFAs have to establish which of the elements of the service predominates.

It states: “Where the advice provided directly results in the customer taking out a financial or insurance product the whole of the service including the advice element is exempt from VAT.”

But where the advice provided outweighs the work done to arrange a contract for example, when a customer receives a general financial health-check but then only purchases a minor product requiring minimal intermediation, the advice would be the predominant service and therefore liable to VAT.

Recommended

15

Talks on private sector replacing Nest

The Government is holding talks with product providers to investigate the possibility of scrapping the National Employment Savings Trust and making it profitable for the private sector to fill the gap. Money Marketing understands the talks are taking place as part of the Government’s review of Nest, which is due to report next month. The […]

Barclays posts £3.95bn profit

Barclays has announced a £3.95bn pre-tax profit for the first half of 2010, a rise of 44 per cent from the same period last year. Much of the gains came from Barclays investment banking arm, which posted a £3.4bn return. The bank also announced that it lent £18bn to UK households and businesses in the […]

Strategic bond choice clouded

Alliance Trust Asset Management head of fixed income Rod Davidson has warned of a lack of transparency in the strategic bond sector. He says a derivative overlay strategy as well as a disparity between what each fund is doing in the sector can make it hard for investors to choose the appropriate fund. Davidson says: […]

‘Switch from DB before CPI move’

Pension experts are recommending people who plan to transfer out of final-salary schemes to make the move while valuations are still being calculated using the retail price index, which is generally more generous. Last month, the Government announced that private sector pension schemes could link increases to the consumer prices index rather than RPI in […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. The real reason behind RDR – a VAT collecting proposal no less.

    Read this article and don’t get hung up on Michael Johnsons comments.

  2. Nightmare waiting to happen.

  3. Monsieur Reynard 6th August 2010 at 9:56 pm

    Read the ABI/HMRC “Guidance” notes.

    If you think you’re having a hard time with the FSA, just imagine what it’s going to be like with a VAT audit. And remember who is liable if the auditor considers you’ve not recovered VAT you should have done…..

  4. So can someone clarify to me how this relates to regular reviews with clients…will it depend on whether advice is given at that particular review of not. My concern is that most clients who are retired will not be able to claim back the VAT and their fee has just increased by 20%.

  5. Let us hope the revised guidance resolves the issue of a client changing adviser since the new advisory firm did not intermediate the original product.

    Could existing advisers face a big tax bill on ‘mature’ clients taken on in the past? Are the guidelines anti-competitive as the new adviser has to charge VAT where the former did not?

    If a client has cash to invest, the guidance seems to suggest VAT exemption unless the trail vastly exceeds the initial.

Leave a comment

Close

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

Email: customerservices@moneymarketing.com