Personal Finance Society chief executive Fay Goddard has argued HM Revenue & Customs’ position on whether advice is liable for VAT under the RDR does not reflect the shift towards service.
HMRC finalised its RDR guidance on VAT liability in March, which said where the customer seeks the arrangement of a retail investment product and the adviser follows a six-stage advice process, advice will be VAT-exempt.
At a Perspective Financial Group roundtable last week, Goddard said the advice should be seen as distinct from any transaction but this is complicated by the VAT rules.
She said: “Some firms are going to have to bite the bullet and say if they are going to be professional and charge. Whatever the outcome, there are potential VAT liabilities.
“The VAT rules have not changed, it is the market that has changed. There has been a lot of misunderstanding and misinterpretation of the rules up until now anyway. But because business models have changed and there is a big grey area of what is and what is not intermediation, one could argue the VAT rules as they are written today are not a good fit with those models.”