A great deal of discussion has taken place over the last year concerning the VAT implications of the RDR.
There is a general unease that the move from commission payments to fee-based charging will result in VAT being chargeable on services which would have been VAT exempt pre-RDR.
Following an informal consultation process, HMRC has recently published its policy in respect of VAT and the RDR. Essentially, HMRC will only accept that an adviser’s services are VAT exempt, where the adviser has acted between the customer and a provider in arranging the purchase of a product. HMRC will expect the VAT treatment to be supported by specific documentary evidence.
It is possible that even where advisers can satisfy these requirements, HMRC may still refuse exemption. This is likely to be the case if they consider that the purchase of the product is a minor part of the overall service.
The recent Tax Tribunal decision in HMRC v Bloomsbury Wealth Management LLP demonstrates the problems that advisers may face when dealing with HMRC.
Adviser firms that have yet to review the VAT treatment of their services and the supporting evidence held would be wise to do so as soon as possible. Our VAT team will be happy to provide practical advice on the VAT impact of the RDR.