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VAT puzzle on defined payments

HM Customs & Excise says it cannot give an answer on whether the FSA&#39s defined-payment system will escape VAT until the system starts.

VAT charged on defined payments would mean increased costs, making consumers less likely to seek independent advice.

LIA public affairs director John Ellis describes the FSA fee arrangement propo-sals as a “fiddle”, raising fears that IFAs agreeing a fee for advice to be paid out of commission will have to charge clients VAT.

Under current rules, VAT is chargeable on advice but not on intermediary services. Where there is a combination of both, cases are assessed on which is the greater.

The FSA refuses to confirm if it received an assurance from Customs & Excise that defined payments will not attract VAT.

A Customs & Excise spokeswoman says: “We cannot say, yes, it attracts VAT and we cannot say no. We would assess the case on its merits. Guidelines would be drawn up when it is implemented.”


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