HMRC have issued further draft guidance on the important issue of VAT and adviser charging under RDR.
Representations were made by interested bodies following the Draft Guidance issued last year. The latest (revised) draft guidance note appears to offer greater reassurance of VAT freedom in relation to charges made for the services of financial advisers.
The draft anticipates that:
An adviser’s role in the retail investment market will normally involve them entering into arrangements with the customer under which they may:
1. gather information about the customer (fact-find)
2. carry out research to find suitable investment options
3. provide the customer with reports, financial health-checks, forecasts
4. recommend specific investment products to the customer, including the prices at which these can be arranged
5. act between the product provider/s and the customer with a view to arranging the sale of the retail investment products agreed with the customer
6. and, where applicable, ie where the customer agrees to an ongoing review service, monitor the customer’s ongoing position to ensure that the products continue to meet the requirements of the customer
Most helpfully the draft guidance appears to contemplate that where the customer has agreed to the arrangement of a retail investment product and the adviser performs the necessary services, as outlined at stages (1- ) 5 above, (regardless of whether the sale of the product is finally concluded), and they are able to evidence that they have done so, no VAT will be due on any charges made to the customer for these services.
And a similar stance, dependant on what the client has agreed in relation to the services that the adviser will deliver (including the potential arrangement of a retail investment product), is taken in relation to charges for ongoing services.
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HMRC Draft Guidance, as of February 2012
(The above HMRC Latest VAT Draft Guidance was current at time of publication. 23 February 2012)