The Financial Services Authority (FSA), the feeble and sleepy organisation that allowed scandals such as PPI mis-selling, RBS and Northern Wreck etc to occur on its "watch", has finally decided to bare its teeth.
The FSA is of the view that HMRC's draft guidance on adviser charging and VAT is contradictory, and should be revisited.
HMRC's draft guidance was issued last month. It states that VAT will not apply where a customer agrees to take out an investment product following adviser recommendations.
However, it also states that ongoing advice, such as regular reviews, will be subject to VAT.
There is then yet another caveat, if the ongoing advice includes portfolio rebalancing it will be exempt from VAT. However, it then goes on to state that investment management or portfolio advice services where an adviser suggests particular transactions will be subject to VAT.
Unsurprisingly this has caused some confusion. At the Personal Finance Society annual conference in Birmingham last week Rory Percival, conduct and risk division supervisor for the FSA, is quoted by fundweb:
“I would suggest those two expressions are contradictory, because a portfolio advice service is exactly that, buying and selling and rebalancing.
So we need to go back to HMRC and say these two bits appear to be contradictory, and also ask exactly what it is getting at in saying that investment management is VATable.”
“The purpose of this informal consultation is to invite comments on the draft and let HMRC know if there are any areas that are unclear or where respondents think further explanation is required.”
Well then, let's see if HMRC takes any notice of the FSA.
Tax does have to be taxing.
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