Discretionary blow as advisers who outsource face VAT liability

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by Danielle Levy on Feb 08, 2012 at 09:52

Discretionary blow as advisers who outsource face VAT liability

Advisers who outsource investment management to discretionary managers will have to charge their clients VAT, according to draft HM Revenue & Customs (HMRC) guidance.

According to our sister publication New Model Adviser, HM Revenue & Customs’ (HMRC) draft guidance on VAT exemptions for financial advice post the retail distribution review (RDR) does not deem outsourcing to a discretionary manager an advised sale under the RDR, making it VAT-able.

The move could serve as a blow to both advisers and discretionary managers seeking to attract business from advisers, although it may not come as a surprise following an HMRC announcement last autumn that advice would only be VAT exempt when the client went on to buy a financial product.

HMRC last week clarified that exemption would depend on the initial client expectation that they would ultimately arrange some form of financial product.

New rules on outsourcing to DFMs are currently being reworked in a separate VAT guidance paper.

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2 comments so far. Why not have your say?

"HMRC last week clarified that exemption would depend on the initial client expectation that they would ultimately arrange some form of financial product."

I was confused before I read this article, now, thanks to HMRC "clarification", I am totally bemused!

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R U Kiddin

Feb 08, 2012 at 12:16

So I am guessing that as long as there is a SIPP or Offshore bond sold in the process any funds passed to a DFM within the tax wrapper and all fees are taken from the wrapper it would be VAT exempt in the same way as a Fund of Fund or manager of Manager fund would be.

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