Sipps and application of VAT needs close monitoring

The tax and VAT position on Sipps and platforms could change in future and was not set in stone, according to Deloitte tax expert Paul Farr speaking at the IFP Accredited Firms Annual Conference today. Mr Farr said, however, that despite views to the contrary the RDR had not altered the position of VAT in relation to financial advice 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.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 in the advice process.He discussed possible future developments including RDR2 and rumours around HMRC guidance on platform charges and Sipps. His view was that these areas needed close monitoring but it was difficult to predict if HMRC would make changes. HMRC was, however, keeping a close eye on the financial services sector post-RDR, he said.In terms of RDR impact on the tax position of financal advice, 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."That did not mean, however,that change would not happen and planners should be prepared.In terms of VAT on ongoing advice, Mr Farr said: "HMRC accept that an ongoing (advice) review service, if agreed at outset, will be treated as exempt."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."{desktop}{/desktop}{mobile}{/mobile}Mr Farr then covered HMRC views on adviser fees, suggesting that HMRC saw adviser fees simply as a replacement for trail commision. These views were branded as "offensive" by one planner at the event.Delegate Andrew Brook Dobson of Brook Dobson Brear 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 to secure their income so their VAT position had changed.

Sipps and application of VAT needs close monitoring

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