Where am I? 
Home Better Business
An IFA has called on the Labour party to state publicly whether it believes VAT should be applicable on customer agreed remuneration (CAR).
In an open letter addressed to Shadow Chancellor Ed Balls (pictured), Simon Mansell, managing director of Temple Bar IFA, said he believed the government is sending out mixed messages about VAT.
He writes that, on the one hand, the coalition says it is concerned with the lack of long-term saving in the UK yet, on the other, is permitting the FSA to press ahead with financial advice reform which, he claimed, may result in the cost of advice becoming more expensive.
Mansell writes: "Does this make any sense at all?
Yesterday, Ed Balls accused the Chancellor, George Osborne, of "recklessly choking off" the UK's economic recovery by raising VAT.
It followed the publication of Office for National Statistics (ONS) figures suggesting the economy is flatlining, with growth slowing to just 0.2% in the second quarter of 2011.
Mansell writes: "Mr Balls, can you state clearly whether the Labour party believes that consumers should pay VAT on CAR post-RDR in those cases where, prior to RDR, none will have been paid?"
Earlier this month, the Treasury Select Committee (TSC), in its report scrutinising the objectives of the RDR, said the evidence it had received suggested there is "some confusion" on when VAT will be payable for financial advice post-2012.
It said it wanted to know why it has not been payable in the past, along with any expected revenues from the change and whether further reform on VAT rules are required.
However, the TSC pointed out that some were not sympathetic to the concerns expressed about VAT.
Jon Lowson, IFA Research and Reports, argued that "the anti-RDR brigade continue to peddle the lie that moving to a fee charging structure will mean VAT on adviser remuneration and therefore higher costs for consumers.
"Whether adviser remuneration is exempt from VAT or not has nothing to do with whether the adviser charges a fee or is paid commission.
"Commission is exempt, because the IFA gives ‘free' advice and gets paid for arranging the product (intermediation, which is exempt).
"If the same adviser took the same commission, but told the client they were taking it as payment for ‘advice', then that would be VATable.
"Commission is only exempt if advisers keep up the pretence that they give free advice."
| Share | |
| Comment | IFA wants Labour declaration on VAT on advice |
More better business news
Email alerts
Recommended reading
Categories
Topics
Comments
VAT
All businesses charge VAT on their services if their turnover is above the VAT threshold unless the services they supply are exempt supplies.Finance and Insurance are both exempt categories.So if you are paid a commission for arranging such products that is also exempt. However, if you are charging a fee for advising rather than the provider paying you a commission for getting them new business (or retaining existing business), you charge VAT like everyone else who advises - Accountants, Solicitors etc. If they want to change or "interpret" VAT law to exempt financial advice then fine - but then why not all advice? Why should VAT be paid for (say) advice on Divorce or Tax but not financial matters? Commissions are paid for new business not any underlying advice. If you don't believe me ask a provider to pay you for advising not to take out one of their products.That is the clear distinction between commission and advice. HMRC have been pretty lenient to date but the switch to fees brings matters into sharp focus. Interesting to see what Mr. Balls says in response.
Posted by: English Bill
Eroding consumer confidence
I will be pleased to receive a copy of Jon Lowson's compliant KFI so that a clients can make a meaningful assessment of Commission v Ongoing Fee's - Vatable or not. I've never knowingly "peddled a lie" and take great exception to these industry "experts" who make comments in the press that identifies my opinion that RDR is seriously flawed as justification to attack my position and further erode consumer confidence. Some clients prefer commission as an option and select to pay me for my work that way - others prefer fees. What I want is certainty. the whole thing is a dog's breakfast designed by committee with an agenda. A trail commission will only rise if the advice is beneficial to my client - fees will rise in proportion to inflation and the historically disproportionate increases in the cost of "compliance" It is importnat and should have been identified and clarified by FSA as part of the RDR impact. It suits pro RDR supporters to Damn commission and promote fees with out a jot of evidence that consumer costs will be driven down.
Posted by: Dave Bettley
Related articles
Most Read
Audio / Visual
With the industry's biggest fund managers, IFAonline welcomes you to the media centre.
This year we have 14 awards designed to mark out the very best products in a highly competitive and innovative market. This includes three new awards for 2011 to reflect the developments in this rapidly growing market: Best Dual/Multi-Index Product, Best Structured (Oeic) Fund and Best Structured Product Provider.
Events
Poll
|
|
Job search
Ifaonlinejobs will open the right investment career path for you. Search hundreds of vacancies on www.ifaonlinejobs.co.uk now
In Focus
Viewpoints
About 2.66 million people are looking to increase the amount of money...
sponsored by
VAT again
Jon Lason is wrong in that even if hecmmission is to pay or t advice still no VAT because " financial intermediation has taken place" Where the work involved is more than 50% for the intermediation one can legitimatly not chare the VAT. It is clear and in the legislation that has existed for more than 20 year. The last years comments on tis subject are a wasteofair and a distraction from thereal issues of RDR and TCF.
Posted by: Jeremy Marsh