In March, HMRC published their RDR guidance on VAT liability, which states that where the customer seeks the arrangement of a retail investment product and the adviser carries out a six-step advice process, advice will be VAT exempt.
The guidance goes on to state that if ongoing services are agreed with the client after a product sale, firms will continue to be exempt. But if there is no evidence or products being arranged, or one or more stages are contracted for under a separate agreement, VAT will be due.
According to the Personal Finance Society, this provides a grey area between regular advice reviews – which do not incur VAT – and a discretionary service, which is likely to incur VAT.
In a bid to clarify the situation, HMRC have revealed that they are due to issue guidance on the VAT treatment of discretionary services following a European Court of Justice’s ruling; with a HMRC spokesperson saying: “The recent ECJ judgment has provided further guidance on the correct VAT treatment of discretionary investment management services and HMRC is reviewing the current UK treatment in light of this.
“Members of HMRC’s finance liaison group will be invited to a meeting in September to discuss the implications of the judgment and any possible changes to the UK VAT treatment going forwards.”
For more information, please visit www.milsted-langdon.co.uk
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