Poor wording blamed for VAT contradictions

Consultancy firm Engage Partnership says concerns that HM Revenue & Customs’ latest VAT guidance is contradictory are the result of poor wording rather than a change of position.

Last week, Money Marketing revealed the FSA is concerned that HMRC’s guidance, circulated to industry stakeholders last month, is contradictory.

The guidance states investment management or portfolio advice services where an adviser suggests particular transactions will be subject to VAT. It also says ongoing advice will be subject to VAT but will be exempt where the ongoing advice includes portfolio rebalancing.

In September, Engage chaired a meeting on adviser charging and VAT attended by HMRC, the FSA, the Tax Incentivised Savings Association, Aifa and the Investment Management Association.

Following the meeting, HMRC said VAT liability will be determined by the intention of the service when advice is originally arranged.

If the intention is to provide intermediation, then it will be subject to VAT while a transaction will be exempt.

Engage director Les Cantlay says he has spoken to HMRC and is confident there has been no change to this position.

He says: “The guidance was very much a working draft in search of appropriate words, which has given rise to this unfortunate impression that there is a contradiction. Advisers do not need to worry, the intention is there will be no change to the VAT position.

“I do not expect that draft was in any way a move from the position that we all arrived at in September. Any contradictions that appear to be there because of wording will be resolved before formal issue of the guidance.”

HMRC is aiming to publish its final guidance early next year.

Financial Escape director Phil Castle says: “The wording is problematic. Hopefully, this will be resolved in the new year.”

HMRC declined to comment.