From 1 January 2013 Independent Financial Advisers (IFAs) are subject to a whole new set of rules on how they conduct their business and whether they should charge VAT. The situations in which the service is exempt, and VAT does not have to be charged are bound by stringent rules:
- · The adviser must act as an intermediary between the customer and the product provider
- · They must act in a sales capacity, not just as an information provider
- · The customer must have intended to buy the product and was not just seeking general information
In reality many transactions are speculative in nature and the ability to demonstrate, or indeed the time to log each activity is unrealistic.
Advisers often provide other services which are VATable such as general advice and management of client portfolios, but the effect of the new rules under the Retail Distribution Review (RDR) means that all fees will become VATable. This will have a double impact, to increase the cost to the consumer of receiving financial advice and due to the IFA charging more that the some of them will be priced out of the market.
This is only a guide to the changes and you should seek professional advice if you have a specific query relevant to your personal circumstances before taking any further steps. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”