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HMRC wants IFAs to help draw up VAT guidance

HM Revenue & Customs has called on IFAs to help it put together specific tax guidance relating to VAT and adviser remuneration.

Speaking at a discussion forum held by the Tax Incentivised Savings Association in London last week, HMRC deductions and financial services team senior policy adviser David Coppins said the department was working on tax guidance for advisers. But he said HMRC needs the help of IFAs to better understand the issues involved when putting together the guidance.

He said: “It is now very much down to HMRC to publish specific tax guidance for you, and that is what we are aiming to do. But I would like to emphasise we cannot do that by ourselves.

“I am not an IFA, I can go away and ask other people to collect information but it would be much easier if through your trade bodies and representatives you actually brought us information about what it is that you do and what you think the VAT liability is.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “The more people they ask the better to ensure the vested interests of the providers do not prevail.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Andrew Brown, Certified Financial Planner 24th June 2011 at 9:13 am

    Having worked for the majority of clients on the basis of charging predominantly time costed fees for the last 15 years we have always adhered to the mantra that our fees are not subject to VAT when the advice provided to a client results in ‘the arrangement or material re-arrangement of one or more financial products’. VAT at 20% therefore is added to initial fees only where the advice provided to the client is holistic in nature, or where either no reference to financial products is made and/or where no financial product is recommended to the client. In common with most FP and IFA firms we have a rigourous process to ensure that our active clients benefit from at least annual reviews, most of which involve face-to-face meetings and dealing with action points arising. In most cases we offset our ongoing time costs against ‘fund based’ renewal payments received from product providers, which do not attract VAT. Where such payments are not available all ongoing fees in relation to routine enquiries, admin and reviews etc attract VAT. Any move which requires that intemediaries cannot be remunerated in this way and any change to the current VAT regime in this regard would mean that clients would be disadvantaged financially to the tune of the typically non-reclaimable 20% VAT cost and that as a consequence the pendulum would swing in favour of tied, commission based advisers and would discourage consumers from seeking independent ‘fee based’ financial advice, which almost all financial commentators and indeed most in the media and Pollitical spheres feel is in the best interests of consumers, and that it is a more professional approach, removing as it does the inherent product bias and potential conflict of interest associated with commission based financial advice.

  2. And is the FSA going to offer any useful input or will it hide behind the sham facade of being independent?

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