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confusing at to what is and what is not client services or advice that is VATable - The latest HM Revenue & Customs draft guidance states that “VAT will not apply where a customer agrees to take out an investment product following a financial adviser’s recommendation.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.

Uk investments, New regulations for renewal or trail commission

Kim North managing director of Technology & Technical was at this month’s Personal Finance Society conference and spoke to many of the top IFA's.  It was good to hear that other top IFA's like Enable of Bishop’s Stortford are generally optimistic about business but she spotted a couple of general frustrations with some of the new rules not matching the real world.

She noted that “The regulator issued another draft guidance paper last week covering legacy commission. It sets out whether various situations will amount to advising on investments under article 53 of the regulated activities order. It contains a rather interesting table explaining when commission can be taken or not when advising on investments.”

“This makes little sense to me” she said “as where a client receives no advice on their investments, the adviser can receive trail commission but where advice is provided on the investments clients may have taken out previously, the adviser cannot receive any trail commission. Does the FSA understand that trail commission does not affect investment advice as trail is paid by the majority of investment funds and products? Trail helps with cash flow for adviser businesses and advisers work hard to keep existing clients and attract new clients with previous investments to bring together a portfolio under the advice of one professional IFA. If existing investments are not advised upon, what happens if the fund manager or team leaves or the fund starts to underperform? Surely advisers should have incentives to provide regulated advice on legacy business.”

Enable reputable IFA’s of Bishop’s Stortford know that some financial business can seem very complicated but are happy to explain as fully as they can the guidance covering commissions.

Not all property is a safe bet

In the news it was stated recently that investors, since 2007, may exceed £30 million in landbanking.
The Insolvency Service is warning the public to be alert to the unscrupulous practice of landbanking as figures indicate that these scams are on the increase. Since 2007 Company Investigations, part of The Insolvency Service, has closed down 49 landbanking companies in England and Wales that have collectively caused the public to lose over £30 million.

Reputable IFA’s of Bishop’s Stortford like Enable would like to bring this disreputable practice to the attention anyone thinking of investing in land. Landbanking involves a plot of land - often green or brown belt - being bought by "developers" and then being sub-divided into a number of smaller plots which are then marketed, often under the false pretext that planning permission will be granted for development.

The Insolvency Service has seen a 33 per cent increase in the number of complaints it has received (2009-2011) against companies involved in these scams and a 100 per cent increase over two years in the number of complaints about landbanking scams accepted for investigation.

Robert Burns, Head of Investigations at The Insolvency Service, said:
"It's clear that landbanking scams are designed to target the more vulnerable investor, many of them trusting pensioners who are eager to see a greater return on their savings or pension lump sum than they could ever expect from traditional savings and investments. Tragically this often leads them to rashly invest in what seems to be, on the face of it, safe 'get-rich-quick' schemes."

"We need to alert people to the warning signs and the fact that if a scheme seems 'too good to be true', that's usually because it is. ‘’

Rental Properties - your rental portfolio

The new from the Association of Residential Lettings Agents (ARLA) states that increased demand for rental property is sparking a renewed interest in the PRS in parts of the UK. If you are looking to invest in property achievable rent levels on residential property have risen in the last six months, according to 60 percent of ARLA member agents, and have outperformed other investment classes consistently for the past two years.

The average period for which a rental property is empty in between lets is just 2.7 weeks per year, down from an average four weeks two years ago. Ian Potter, Operations Manager at ARLA, said: “Three quarters of our members are reporting that demand for rental property is outstripping supply and, with rental returns currently at 5 percent, anyone thinking about investing a property to rent could be well-placed to consider their options in the coming months.”

“Our research shows that prudent landlords are moving quickly to expand their portfolios, with almost a quarter (23 percent) reporting that they have bought properties in the last year. The most popular regions for investment are the North West, Midlands and Central London. In contrast the Rest of London saw the fewest landlords buying property.

Reputable IFA’s like Enable of Bishop’s Stortford could help you look at your investment portfolio with a view to a buy to let mortgage even if it was appropriate to your means and plans. Not everyone is cut out to be a landlord, but at the same time a good letting agent should be able to help you navigate the market should you choose to invest.

Safe as houses...

Recent industry data seems to indicate that buy to let property investment continues to be one of the best ways to invest at the moment.

Statistics from the Halifax reveal house prices increased by 1.2 per cent in October with the average home in the UK now valued at around £163,311 and the rental market has continued to go from strength to strength as first time buyers struggle to get on the property ladder.

Almost four million homes were designated in the Private Rented Sector (PRS) in 2010, providing homes for one in six households and the Countrywide agency says rental properties now take an average of just 12.7 days to be let, with an average of five prospective tenants competing for each property.

Ray Withers, director of buy to let experts Property Frontiers, added: “With demand outstripping supply in the buy to let market, those with enough capital to invest in the growing buy to let arena are benefiting from some of the highest monthly returns on record.”

Perhaps unexpectedly the North West has enjoyed a 20 percent rise in rental rates this year alone and in Liverpool demand is outstripping supply probably due to the reduction in home ownership and the number of new homes being built (well below the Government target of 250,000 per annum). Meanwhile, demand for accommodation in and around the city centre also continues to rise as more students and young professionals enter the area.

Independent Financial Advisors like Enable of Bishop’s Stortford can help you look at your investment portfolio.

Pensions in safe hands...

A key part of June Mulroy’s work will be a blueprint for DC provision which will outline 11 basic principles that trustees, providers and employers will need to follow.

The regulator’s initial discussion paper, entitled, Enabling good outcomes in DC pension provision, published in January, identified six elements which it believes are important for achieving good outcomes for savers; appropriate decisions with regards pension contributions, appropriate investment decisions, efficient and effective administration of DC schemes, protection of scheme assets, value for money, appropriate decisions on converting private pension savings into a retirement income.

The Pensions Regulator will produce 11 principles for good quality defined contribution provision building on these six key elements.

Mulroy says: “We have tried to capture the principles in simple language, so the opposite should obviously be wrong. So, for example, we will say ’assets should be safeguarded’ the concept of assets not being safeguarded is obviously not right. “We will also outline a couple of principles about charging around transparency and simplicity.”

While the amount providers charge on pension products has inevitably grabbed the headlines in recent weeks, the regulator is equally focused on the costs incurred by providers. Mulroy says: “. We need to get disclosure of what it is costing because we do not have a proper comparative market. Getting to that point is not going to be easy but it is absolutely doable.”

Whatever kind of provision you have made for retirement Independent Financial advice from reputable IFA’s like Enable of Bishop’s Stortford can help put your mind at rest.

Unconventional pension regulation...

It’s hard not to notice the Pensions Regulator executive director for defined-contribution June Mulroy she is not exactly your stereotypical regulatory official. To start with she is a woman and she dresses in quite an unusually flamboyant way, her hair is dyed pink and she is plain talking.  She has been tasked with kicking the pensions industry into action on some pretty sensitive and entrenched issues, such as pension charges and the disclosure of costs.

She says: “We have had some very interesting conversations with people about what their charges are. Interesting in the Chinese sense. Nobody can really tell us what their charges are. We have done a lot of research, so we know some of the things that are underneath the charges. But we really had to dig to get people to be honest and open”.

“There is an awful lot of Tommy Cooper that goes on when people try to describe charges but I do not think it is as complicated as certain people in the industry try to make out. It is no more complicated than forms of pricing are in any financial product.”

Mulroy is attempting to break through some of the jargon and complexity of the pension industry as she looks to improve both the quality and the comparability of DC schemes.

Your pension requirements might not be as flamboyant as June Mulroy but plain talking is what Enable like and reputable Independent Financial Advisors like Enable of Bishop’s Stortford are happy to talk through your pension provision with you.