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Network VAT threat is lifted

The IFA sector has won a reprieve from HM Customs and Excise over VAT charges on member fees following one small network&#39s decision to fight a ruling made against it.

Customs and Excise has backed down on forcing the network to pay VAT on member charges after further examination of the contractual relationship between the network and its appointed representatives.

IFAs are claiming a victory for small businesses and believe that new proposals will avoid a situation where networks are hit with backdated VAT bills totalling millions of pounds.

In a letter sent to the network seen by Money Marketing, a Customs senior policy adviser admits the original analysis was wrong. It has overturned its decision based on an improved understanding of existing regulatory requirements for networks and their appointed representatives.

Guidance will be issued shortly by Customs outlining the VAT treatment applicable to services provided by IFA networks that are organised in a way that makes them fully compliant with regulatory requirements.

The letter states the fees that networks charge members are VAT-exempt under the following circumstances – networks must have a contractual relationship with providers, with ARs acting on the network&#39s behalf at all times; clients are clients of the network rather than the adviser; and the network is legally liable for any sanctions imposed by regulators.

HM Customs and Excise says: “Customs are committed to issuing a business brief to clarify the VAT position to the IFA industry once it has finalised the review of specific rulings issued to a small number of IFA networks.”

Whitechurch IFA Network chairman Kean Seager says: “This is a reprieve. There was no doubt that their original decision was that all network services were VATable.”

Financial Services Planning Consultancy consultant Graham Miller says: “This communication is good news and indicates the briefing will be concise and that it will be essential that networks fall within these provisions.”


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