Mortgage introducers who get a fee for referring clients on to an intermediary or network could face VAT bills.
The position has been clarified for appointed representatives who will not pay VAT if they are working within a recognised network structure but it looks likely that mortgage introducers will be liable for VAT.
Lead-generation agencies pay VAT on their services but Customs and Excise has now made it clear that individuals acting as introducers will also be liable for VAT.
Customs and Excise says if the fee is charged by the broker for bare introduction of the person seeking with the person providing the mortgage, then the fee will be taxed at the standard rate of VAT.
High-level negotiations between Customs and Excise, the Treasury, the FSA and industry trade bodies saw the publication of a business briefing which clarified the position for appointed reps.
The guidance says areas where services are additional to or outside the regulated business being provided will be liable for VAT.
One area that tax experts believe will be affected is mortgage reviews, which are conducted for a fee separate to a charge for advice.
Another practice that could attract VAT is referrals between IFAs, for example, transferring a client without advice to another adviser who specialises in a particular product.
Financial Services Planning Consultancy consultant Graham Miller says: “Acting as an introducer is synonymous with lead generation and therefore it will be Vatable but this is not the IFA's problem, it will always be the introducer's cost.”
Customs and Excise spokeswoman Florence Palmer says: “If the intermediaries were doing no more than providing information to the principal intermediary, who then used that information to introduce his client to a mortgage provider, then the fees charged by the intermediaries providing the information would be taxable.”