09 Feb Advisers Told to Charge VAT to Clients if They Offer a Outsourced DFM Service
Financial Advisers have been told that they will be forced to start charging their clients VAT if they offer them an outsourced discretionary fund management (DFM) service, under new rules drafted by HMRC.
The draft version of the guidance that the HMRC have recently published in relation to VAT exemptions in the aftermath of the implementation of the retail distribution review has removed all mention of outsourced DFMs, due to it not being deemed an advised sale under the terms of the RDR. This means that any client who makes use of such a service will have to be charged VAT.
New rules on outsourcing to DFMs are being reworked into a separate VAT guidance paper.
Final guidance will be published on February 14th after Director of consultants Engage Partnership, Les Cantlay, claimed that IFAs will need to consider the implications of the process being "VAT-able" once RDR is implemented.
Cantlay adds that advisers will be required to write engagement letters that provide evidence of the clients' entry into intermediation, thus allowing their services to be VAT exempt.