Adviser groups which try to restructure their businesses to get out of paying Vat on member charges could find themselves hit with a £5,000 fine under new anti-avoidance legislation from the Government.
Measures introduced by Chancellor Gordon Brown in the last Budget to crack down on extreme and aggressive forms of tax avoidance are set to come into force in July.
Although not specifically targeting financial firms, the legislation is intended to catch businesses which should notify a scheme either by use, turnover or advantage.
There are certain designated schemes and the penalty for failing to notify one of these will be 15 per cent of the VAT saved. The penalty for not notifying something that is not a designated scheme is £5,000.
Tax experts believe the penalties will be payable for non-notification even if the scheme is found to be compliant.
If an agreement can be struck with HM Customs and Excise, a common position could be established for the financial industry which could provide some protection.
Graham Miller, from Financial Services Plann-ing Consultants says the Vat debate embraces issues across several technical areas and there is an opportunity for networks to review their entire position.
Miller says: “Whatever the outcome of negotiations, if networks find themselves disadvantaged by their existing arrangements they will need to take care that any changes they make are within what is agreed and are seen to be for genuine commercial purposes and not done artificially for VAT purposes.”