What is VAT? Clarity about what qualifies as VATable services for IFA's

Even experiences IFAs like Enable of Bishop’s Stortford can find it very confusing at to what is and what is not client services or advice that is VATable - The latest HM Revenue & Customs draft guidance states that “VAT will not apply where a customer agrees to take out an investment product following a financial adviser’s recommendation. Investment management or portfolio advice services where an adviser suggests particular transactions will be subject to VAT. Ongoing advice, such as regular reviews, will be subject to VAT but if the ongoing advice includes portfolio rebalancing, it will be exempt. It also states that investment management or portfolio advice services where an adviser suggests particular transactions will be VATable.”

Portfolio rebalancing is simply buying and selling investments. What if an investment recommendation is made that then makes it a VAT-exempt transaction when the fee is charged but then the client’s situation changes and they do not invest? Would the client be re-invoiced to include 20 per cent VAT as the professional service provided was pure advice as there was no transaction?

Kim North thinks “Now is the time to include more discerning IFAs in HMRC and FSA policymaking to ensure all the remaining confusion is cleared up well before the introduction of the RDR.
If this happens, rules will be made that are in the best interests of the financial adviser and the investing public and therefore match what goes on in the real world.” IFAs Enable of Bishop’s Stortford are happy to help you work out what is VATable.