Taxbriefs Commentary Library

VAT and financial advice – clarity, but with some loose ends

David Shelton, 29 Jun 2012


The position on VAT has been clarified by HMRC. For most advisory firms their services will be exempt from VAT charges.

Provided clients pass through the advice ‘gateway’ and expect to be taken through a process that includes ‘intermediation’ they will not pay VAT. It is important that the process is documented in the client agreement and that the expectation of intermediation is clear. This also applies to client agreements for ongoing services which should explicitly include the likelihood that, on review, changes will be made if required, to ensure that the client’s plan remains up to date.

Firms have different approaches and means of explaining how they work. So it is important to make it clear to clients that there is an intent of intermediation and that is how the process works. Inevitably there will be a small number of clients who do not go right through the process. But again there is no VAT if the proposition and initial expectation is that intermediation would take place.

There are two instances where VAT will apply. The first is when a client specifically asks for a piece of planning or advice work with no product or fund arrangements. The second relates to discretionary services where it is expected that the European Court of Justice will confirm its preliminary ruling that VAT will apply. The final ruling is expected within a few weeks. This potentially places managed portfolios at an advantage and advisers will need to consider this when making recommendations, although the suitability of advice for the client should normally come ahead of VAT considerations. Some commentators think that the judgement could have implications for VAT on all financial advice.

In effect, the guidance has not changed but the clarification is useful because some existing working practices have fallen outside the rules.

David Shelton

This article first appeared in the June edition of Financial Timesaver – the monthly newsletter for the busy financial adviser.

David Shelton is the author of The Business of Advice which covers a wide range of business development issues. If you know your advice business could be improved, this practical and focussed approach will guide you in managing your business successfully through transition. Go to to find out more.


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David Shelton

Author, Business of Advice

David Shelton has more than 20 years experience of working in marketing and business development in the financial sector. For the last 12 years he has worked specifically with IFAs, helping them deal with a range of issues.

David Shelton is author of The Business of Advice - How to Manage and Develop a Successful Financial Advice Business, published by Taxbriefs in association with The Personal Finance Society.


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