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MM Leader: Clarity is needed around adviser-charging

Some platform providers receive confirmation from HM Revenue & Customs that fees and rebates will not be subject to VAT. Others, including Ernst & Young, are not so sure. The Institute of Financial Planning warns local HMRC inspectors are interpreting adviser-charging rules differently.

Elsewhere, more details about the tax treatment of the adviser-charging regime are dripped out to an industry desperate to understand how the new rules will work.

As we count down to January 1, 2013, and advisers work hard to make the transition for their businesses to abide by the new requirements, it is still far from clear how these rules will work in practice and how this will affect their incomes and their clients’ investments.

Product providers and platforms also have a list of questions that need answers as they prepare their post-RDR propositions. Headaches for the platforms are exacerbated by the FSA’s unfathomable refusal to so far back down from its ban on cash rebates. The alternative solution put forward by the regulator adds complexity and attempts to solve a problem that does not exist.

A working group, made up officials from the Treasury, HMRC, the FSA and industry bodies, has been trying to resolve the tax implications of adviser-charging on VAT and the tax applicable to products. It will have to work hard to ensure clarity is achieved in good time for the industry to be ready for the RDR.

There is also the concern that any clarity arrived at is then applied retrospectively by HMRC. The Tisa council chair has made the sensible suggestion of a tax amnesty to ensure that advisers, platforms and providers are not hit by having the clarified rules of the day levied on past business.

Yet another area in need of clarification is ensuring the new adviser-charging rules apply properly to restricted advisers. The FSA is clear that restricted advisers can only be paid from the client but we need to be clear how this process will work, with appropriate rules in place to ensure unsuitable business is turned away.

HMRC admits more clarity is required. We need a commitment from the Government that this clarity will be achieved as a priority with the help of the FSA and industry bodies. The longer we are kept in the dark the louder the calls for an RDR delay will become.


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

  1. As your leader states, if “the FSA is clear that restricted advisers can only be paid from the client”, how can the restricted adviser be paid a salry from their employer? That salary has to have come from somewhere, which means it must either have come from reserves or have come from the product being sold….
    For restricted advisers to be treated in the same way as independant advisers, they will have to agree the cost of advice with the client and that should be all they are then paid, which means they would not be able to have a salary other than for provding ongoing administration assistance to the client. Where would that then come from, the product charges? The problem for the restricted advisers working through banks is that would mean they’d actually have to provide some ongoing service to justify the salary and as we all know, all the banks have been interested in has been new business (or perhaps churned)

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