Is Your VAT Served Hot or Cold?

Recent articles have highlighted once again the potential for confusion over adviser VAT liability. Much like the PR disaster that was the “pasty tax” HMRC seem to be clouding our judgement by suggesting that client advice will be subject to VAT when the process of serving the client does not result in an investment transaction. This is different from the view developed earlier in the year.

Referring back to our initial blog on March 23rd it appeared that the final opinion was tricky but clear enough. If the component of advice delivered to clients was done in good faith as part of the broader process of investment intermediation then the advice was not subject to VAT.

This meant that as long as you could demonstrate that you were following a logical six step cycle that included risk profiling, preparing reports, advising the client and arranging or monitoring their investments then you are not required to collect VAT.

The Personal Finance Society have presented a series of scenarios under which VAT may be applicable (Is Your Advice VAT Exempt) dependent upon the outcome of the process, i.e. if the client undertakes the investment transaction.

Time for An Opinion?

If you have not already done so it is probably time to speak to your accountant about the responsibility to collect VAT. It may not be their specialist area however they will be able to locate somebody that can tell you what your liability might be.

As part of our research in developing our own services we considered the effect of VAT and the adviser six step cycle that was recommended as the investment intermediation process. In doing so we were helped by Jim Burberry at Baker Tilly.

Jim and his equivalents are able to determine reasonably if you will have to register for VAT or not. However, in order to do so you will have to present a very clear view of how you conduct your client business.

It is worth remembering that the overriding principle in determining VAT liability is the nature of the activity that you undertake and not the form of payment that you receive for what you do.

Have You Defined Your Business Model

You might wonder why we are interested in your potential VAT liability? The process of preparation for RDR, adviser charging and understanding VAT liability is dependent upon your ability to define clear processes for delivery of client service as part of your business model.

Effective investment intermediation has been outlined to include client risk profiling, preparing reports, delivering client advice and ultimately arranging and monitoring investment performance.

When dealing with HMRC we are very aware that it is not enough to say that you follow a six step cycle of intermediation. It is important to demonstrate that your business is structured around these key investment activities.

We have designed our reports to assist you in demonstrating your investment intermediation.

We provide an objective and consistent weekly view of asset classes, geographic markets and investment sectors that help you as the adviser consider reporting, arranging and monitoring investment performance on behalf of your clients. All component parts of the investment intermediation process.

If your annual revenue exceeds the VAT threshold of approximately £80,000 it is worth taking some time to consider how you go about your business and whether it is worth seeking a professional opinion on your VAT responsibilities.

Thereafter based on this advice you might want to take further steps in your compliance process to demonstrate that your client activity conforms to the process of investment intermediation rather than forming a continuous stream of advice.

Being able to demonstrate clearly how you do business will be the best form of defence in the unlikely event that you are ever selected for a VAT inspection.

To understand more about what we do and how we do it please contact



Keith Reid
Keith Reid
Keith’s training as an accountant and auditor has emphasized the importance of evidence in all good decision making process. The ability to monitor management processes effectively is a key to making the most of business opportunities. Both Keith and Gerry believe that this priority for capital preservation is the common principle that sets the framework for any sound investment strategy or business model.