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Treasury says active advice will avoid VAT on proc fees

The Treasury says brokers may be liable for VAT on retention proc fees if they fail to help their client through the entire sales process.

It says if a broker recommends that a client remains with their lender but does not have some involvement in the deal, such as helping arrange and assist with the application, then it would be classed as a professional service and the proc fee would incur VAT.

But if the intermediary helping the customer, the proc fee would be exempt from VAT.

Association of Mortgage Intermediaries director-general Chris Cummings warned at Money Marketing Live last week that brokers may end up having to pay VAT on retention business.

A Treasury spokesman says: “The VAT treatment depends on exactly what service the broker is providing.”

Cummings says: “If brok- ers get commission on a retained product, then VAT may be payable. Currently, VAT is not applicable on active intermediation but, if you are getting a client to stay, then it could be VATable as it could be classed as a professional service.”

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