Paul Farr from Deloitte UK updated delegates at the Accredited Financial Planning Firms Conference in St Albans this morning about the application of VAT for Financial Planners. He said HMRC had accepted that fees were, for some advisers, a replacement for trail commission and VAT was applied accordingly.
This idea was called "offensive" by attendee Andrew Brook Dobson of Brook Dobson Brear who said that for Financial Planners to hear this suggested that fees were just a substitute for trail commission which they were not.
Mr Farr replied that the HMRC view was not intended to be offensive but simply accepted the reality of the RDR changes and that many advisers had to move from trail commission to fees so their VAT position had changed.
Mr Farr said despite views to the contrary the RDR had not altered the position of VAT in relation to fees and that in general VAT was due on professional fees although there were some exceptions and certain "pinch points" when it came to the application of VAT.
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He said, for example, VAT was due on discretionary portfolio management but ongoing client reviews may be exempt. He urged planning firms to take advice and avoid taking risks or guesses when it came to when VAT was applicable.
He discussed possible future developments including RDR2 and rumours around HMRC guidance on platform charges and Sipps.
In terms of RDR, Mr Farr said: "Does the RDR change the liability? No it doesn't. It does shine a light on arrangements.
Have we seen an increased analysis or attack on your community? No we haven't."
Mr Farr said: "HMRC accept that on going review service, if agreed at outset, will be treated as exempt."
He said that planners had to be aware that rules may change and needed to keep up with developments.
"The danger is HMRC back away from their initial guidance and start to challenge the review service. That's where it may end up. I'm not saying that's going to happen but we were asked what we see happening in the future for this event."