View more on these topics

HMRC puts burden of VAT evidence on IFAs

HM Revenue & Customs has clarified its stance on VAT relating to financial advice, confirming that advice which includes portfolio rebalancing will be VAT-exempt.

In draft guidance on VAT liability, published this week, HMRC states that VAT will not apply where a customer agrees to take out an investment product following adviser recommendations.

It states that ongoing advice, such as regular reviews, will be subject to VAT but if the ongoing advice includes portfolio rebalancing, then it will be exempt.

If the client takes advice and agrees to a transaction but for any reason the adviser fails to bring about the sale, the service up to that point will also be exempt.

However, if the client decides not to proceed with the recommendation, then VAT will apply.

Advisers will need to have evidence of the tax treatment of advice services through documents such as client contracts, letters of engagement and regulatory returns. If an adviser cannot show evidence of why advice was exempt, VAT will be charged on that service.

Ernst & Young partner David Bearman says: “The real challenge is that the tax decision will have to be supported by evidence produced by the client or taxpayer, which is an additional burden for IFAs. We would recommend that IFAs and insurers agree their approach and what is acceptable evidence in advance with HMRC.”

Informed Choice managing director Martin Bamford suggests most regular reviews will lead to rebalancing and therefore be VAT-exempt.

Personal Finance Society chief executive Fay Goddard says: “There are still some questions that need answering, particularly around where the line is between reviewing, which is taxable, and rebalancing, which is exempt. This issue about where a client decides not to proceed any further, clearly HMRC is saying it is taxable, even if the intent was to intermediate. I think we will see people looking at their proposition on the basis of fees being contingent on the sale. If that is the case, it is a retrograde step.”



FSA warns over European mortgage directive

The FSA has expressed concerns about various proposals from Europe on future regulation of the mortgage market, including plans to enforce whole of market mortgage advice. Speaking at the Council of Mortgage Lenders’ annual conference today FSA director of conduct policy Sheila Nicoll (pictured) welcomed the fact that the European Commission had recognised the benefits […]

Scheme pension: IFAs in state of purgatory

The Government has been accused of leaving IFAs and pension providers in “a state of purgatory” after an amendment to the Pensions Bill reclassified scheme pension arrangements as defined benefits. Last week, Money Marketing revealed the amendment risked killing off the market for scheme pension by forcing them to comply with DB funding regulations.This would […]


Mike Kirsch appointed interim MD of Origen

Aegon UK has appointed former AWD Chase de Vere chief executive Mike Kirsch as Origen interim managing director.   Kirsch will take up his appointment, which is for an initial period of six months and subject to regulatory approval, on November 1. Kirsch stood down from Alico following the sale of much of the business […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. This is possibly the best article on the recent HMRC draft, inasmuch as it doesn’t attempt to do more than repeat what’s in the draft. Other articles have generated a lot of heat about this subject but not much light – and as one of a group working with HMRC to ensure the final version produces as much light as possible I am well aware that questions remain. As regards the point about fees being contingent on implementation of products – of course this appears anti-RDR and HMRC are well aware of such issues so are in discussion with the FSA. I am sure that the final guidance will clearly set out the core principles and we will then see industry groups agreeing some worked examples, flowcharts etc with HMRC to flesh matters out.

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