View more on these topics

VAT analysis

The letter in the October 21 issue on the supposed advantages of fees over commission demonstrates once again that the advisory community even now lacks a proper understanding of when VAT should be charged for services supplied.

Phil Shaw incorrectly states that VAT would be applicable on his initial fee if it was paid direct, as opposed to going in and out of a pension product and somehow mysteriously becoming VAT-free.

If VAT is due on his fee, then it is also due on his CAR-style commission paid from the provider. In fact, as what he is doing is intermediation, the service provided is clearly exempt.

His review fee may also be VAT-exempt but that depends on how much of what he does at the review involves intermediation and how much other services. If the majority of the review work is intermediation, the fee will also be VAT-exempt.

Once again, if VAT is due then it is also due on the CAR commission – the method of payment is irrelevant. All the above assumes he is doing enough non-exempt work to be required to register for VAT in the first place.

Paying fees through pension products is clearly something the FSA expects to happen and it has commented it has cleared this approach with HMRC in past consultation documents. So the approach of funding the advice cost with extra contributions (on which tax relief is allowed) seems perfectly legitimate.

The very good point Phil makes is that if you ask someone if they would rather pay a fee or commission, the answer will mainly depend on the relative magnitude of each.

If I quote someone a fully time-costed £600 as a fee for a piece of new advice work and my comp-etitor wants to take 3 per cent commission on a sum of £100,000 to be invested, I get the business every time. If the invested sum to be is £10,000, it is not going to be my client.

Mark Potter
Ethos Financial Management


Treasury urged to scrap Pension Input Period

The Treasury is facing calls to scrap the Pension Input Period following its decision to cut the annual allowance from £255,000 to £50,000. Experts argue the PIP, the timescale HMRC uses to measure annual payments into a pension scheme, could be out of sync with an employer’s tax year. If that is the case, an […]

Battle lines

The big battle is being fought between the Americans and the Chinese. On the one hand, there is a desire to inflate away the debt problem. On the other, a need to deflate to moderate inflationary pressures. And the differences do not end there. The US would like to see the Chinese currency higher against […]

Parental leave and pensions

Fiona Hanrahan  – Senior Product Insight and Technical Support Analyst We are often asked how parental leave impacts workplace pension schemes in terms of funding in general, auto enrolment and salary exchange. This article will explain each of these. How does parental leave impact the funding of workplace pension schemes? A member of a defined […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm