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Revenue slams FSA in split on platform role

HM Revenue & Customs has criticised the FSA for defining platforms as providing administration services and sparking fears over VAT liability, as it says that platforms are clearly based on charging for transactions.

In its platform discussion paper in November, the FSA categorised platforms as providing a service based on admin rather than distribution. Ernst &Young raised concerns in February this could mean VAT would be applicable to platform fees and rebates.

At a discussion forum held by the Tax Incentivised Savings Association in London last week, HMRC deductions and financial services team senior policy adviser David Coppins said: “I do not think the FSA has been particularly helpful on this. The FSA had a very bland description of what a wrap platform was and all it talked about was viewing them as providing the administration of securities and a person’s assets.

“That is not the way we ended up seeing what wrap platforms actually do because most of the ones we have seen actually charge for transacting.”

Coppins argued the purpose of some platforms is to make it simpler for the client to manage their portfolios themselves. He added: “If that is the case, then that is a very direct relationship and if all clients that are being charged is the purchase of shares, for example, with the platform taking x as a percentage, then that is clearly a charge for a transaction. You cannot get away from that and we would not want to dress it up as anything else.”

Avalon director Harry Kerr says: “HMRC seems satisfied VAT will not apply to platforms. The FSA does not seem to understand what kind of service platforms provide. This is probably why the cash rebate issue has come up.”

The FSA refused to comment.

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. What are the FSA doing???? Clients mange their own assets, holy hocks! Our WRAP is to consolidate, new contracts, legacy contracts, and any future contracts on one manageable platform with client access for valuations and overview only. Our clients both purchase through their WRAP account and the wider market… AND IT IS ALL TRANACTIONAL.. Do your research Hector!!!

  2. Print off!

  3. Can’t get anything right can they?

  4. Sophie Sprigglet 24th June 2011 at 9:42 am

    Who’d of thought it, the FSA dont seem to understand the business they regulate!!! So now not only do IFA’s, Providers, networks etc know they are a waste of space but the revenue as well. Perhaps this might feed back to the decision makers in Westminster.

  5. It does say something about the competence of the FSA when HMRC imply that the FSA does not understand the functioning of widely used financial facilities.
    How can regulation be appropriate when the FSA do not “know their client”.
    When will Parliament wake up to the fact that the FSA is now just a bloated bureaucracy, providing rulings by assumptions not facts. It is unlikely that its successor will be any better. The first few pages of the latest edition of A New Approach do not give any hope that the Government understand why the present regulatory structure is a disaster.
    We are now ruled by pre-conception at all levels because the professional politicians are too self absorbed to understand what is happening in the outside world.
    There is a good argument for having a minimum age for MPs, say 45, so we know they have some understanding of the outside world. A similar restriction on Regulators may not be such a bad idea.

  6. If HMRC are prepared to say the above in public, what are they saying in private.

  7. The FSA does not seem to understand ……….

    How right you are.

  8. Be careful, be very careful. The Government poor demented soles gave the FSA the authority to make Law, without reference to Parliament.

    Does this authority encompasse, the total abolition of Parliament?

    But not to worry the FSA only employ the best people.

  9. 18 months before the FSA goes live with RDR we have more evidence the the FSA is not fit for purpose. Now we have HM Revenue & Customs telling the FSA what a platforms is! Maybe someone could tell the FSA what an IFA is and what he or she does.

  10. I am not surprised and totally agree with Annon above “what must HMRC be saying behing closed doors”

    There is still one thing nagging me !! we know the government will say “look this is why we have split up the FSA and made our own regulaters” but will they understand these will be the same halfwits we had already.

    They need to be sacked and sacked now and save a load of revenue that continues to be wasted.

  11. Another Pissed Off IFA 24th June 2011 at 11:44 am

    Were we not all told in the physics classroom not to change more than one thing at once.

    The FSA is changing everything at once and it is clear they don’t know what they’re doing.

    This is going to be a very interesting 18 months….

  12. Yet another demonstration of incompetence by the cretins of Canary Warfe! They show again that they don’t have any understanding of financial services.
    How can anyone have respect for Sants and his cronies?

  13. All the FSA need do is look on Wikepedia :-

    “”Fund Platforms fall into two distinct groups: Fund Wraps and Fund Supermarkets. Both are services that enable investors to buy investments simply online – usually at a discounted rate. In many cases the investments purchased can then be held on the Platform in a range of tax efficient wrappers. The investments that can be purchased via each Platform varies depending on the service provider too. Investment Platforms like these are available in the UK. This type of investment vehicle, is provided by a Wrap Service or Fund Supermarket provider. Shares, bonds and a range of funds from literally hundreds of fund managers can be held in many of them but it does vary from provider to provider. Individual investors can usually hold a range of investments within several different types of ‘tax wrapper’, …………………….

    The investments you can buy via these services and often hold on the platform itself can include:

    direct mutual funds (i.e. Unit Trust or OEIC) or investment trust or SICAV holdings
    individual equities, corporate bonds
    cash
    ETFs
    VCTs
    hedge funds
    gilts
    structured products
    property partnerships.

    These Fund Platforms aren’t really products, they are services that enable investors to buy and often hold their investments online all in one place, with a degree of flexibility to switch investments around as their lives change without having to keep paying high charges for buying and selling them. Many provide the opportunity to buy assets in-specie, which helps the investor to switch investment without unnecessary charges. these services also cut down on paperwork.

    Wrap services are online services where investors access their account details online. Fund Supermarkets are generally more transactional and are used for buying funds cheaply online – either by a financial adviser (on behalf of a client) or by the investor themselves.

    Many investors choose to take independent financial advice, in the selection of a fund platform provider, in the selection of funds and ‘tax wrappers’ and in the ongoing monitoring of performance. “””

  14. Draft Financial Services Bill - being rushed 24th June 2011 at 1:15 pm

    This shows the abuse of powers that the FSA has. If you never want this to happen there is an action you can take right now. Once you have taken this action then copy and paste this to as many IFA’s as you know!

    There is a strong rumour that the Treasury is proposing a very tight timetable for the scrutiny of the Draft Financial Services Bill. This would allow the FSA to reinvent itself in all but name. Could this be the reason for the rush? This is a recipe for legislating in haste and having to repent at leisure – as we are now repenting the haste with which Gordon Brown pushed through FSMA 2000 with all the resulting abuses.

    The White Paper proposes that the PLS should get under way well before the Recess. When Julian Caesar wanted a quick decision he would always hold his meetings on Friday, before the weekend! 12 weeks smacks of a rushed job which may suit those who want much of the same but is not long enough to review and change things. I think that it is entirely reasonable for every IFA reading this to write to their MPs to make representations to Sir George Young about the desirability of more time for the PLS.

    ACTION:
    Please will you ask your MP for more time from Sir George Young? I believe that the Speaker tries to allow every MP who wants to raise a point at Business Questions to catch his eye and I hope you and as many colleagues as possible will join in vociferous demands that more time is allowed. Otherwise this dog’s breakfast of a Bill will cause a lot of trouble in years to come.

  15. You couln’t make this up if you tried!
    What a complete and utter waste of time.
    Maybe the Regulator needs a Regulator

  16. Julian Stevens 26th June 2011 at 5:29 pm

    “I do not think the FSA has been particularly helpful on this.” Now there’s as ripe a euphemism as you could wish to read anywhere.

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