As usual...

As usual Ye Olde Worlde Life Company weighs in with a headline article that is as much use as a chocolate teapot. What's the point of turning up late to the debate and then spouting off that splitting charges may lead to clients being charged more? What's the alternative, where's your solution? Have you considered the other alternative that we spend an extra couple of hours on each case determining which elements were Vatable and which weren't - and billing the client for the time taken to work it out - believe me, having done it, it's not that simple. the other alternative is even worse, getting it wrong and ending up owing HMRC - and then trying to go back to said clients and recovering the VAT. Splitting the charge and working out the dominant service in each element of the work is the best approach I have been able to come up with. It is fair, consistent and saves a lot of time. Would the man from the Pru kindly not go for an attention grabbing headline with no substance, and instead add some value to the debate.

Posted by: Dennis Hall

A challenge for advisers, not providers

As we get closer to 2012, the opinions of old-world life assurance companies when it comes to things like pricing and business strategy become less relevant by the day. Where they do have an opinion, it often sounds like a desperate attempt to maintain 'control' over adviser remuneration and the distribution of their products. The reality is, clearly defining the cost of your advice and cost of implementation does not result in higher costs to the client. What it does result in is clarity, truly impartial advice and generally lower total charges than the equivalent commission payment. VAT is a price paid by the clients of professional advisers. If you are able to articulate your value, the movement from VAT at 17.5% to VAT at 20% is about as irrelevant as the opinion of a product provider.

Posted by: Martin Bamford

Spot on Dennis

Once again Dennis has hit the nail on the head. It is significantly easier to administer VAT by splitting adivce and implementation than it is to work out whether advice or prouct sale has been the predominant service. What if HMRC don't agree with your interpretation? I fail to see how a client won't be able to understand: "I charge for advice and implementation separately. My advice fee attracts VAT, my implementation fee does not."

Posted by: Huw Jones

Review your services

If you are providing Financial Planning then splitting your SERVICES is the way to go. Financial Planning is not regulated, so by definition cannot be exempt, as there are no products involved to which exemption could apply. Regulated investment services and associated advice are exempt. Seeeempuls!!

Posted by: Mijke Stafford

Separating advice from product sales

I have to agree with Mike Stafford on this one. We have a separate company that gives generic advice on a fee only basis, so our USP is that we can be completely unbiased, as the company does not receive commission. It is also unregulated (but a member of the IFP). My separate IFA business which is FSA direct receives both commission and fees, and can therefore legitimately not charge VAT as it only deals with the sale of products, including the implementation of advice given by the Financial Planning company. Incidentally, it is quite legitimate for the IFA business to pay introducer commission to the Financial Planning company, which has all sorts of advantages. You might think this is a new idea - well we have been running the two businesses like this since 1994!

Posted by: Jason Ball