“Exemption does not apply to advisers offering pure advice to a client, this remains the same as it has always been and is similar to advice offered by accountants or lawyers. In this respect the abolition of commission has not changed the VAT treatment.
“For the VAT exemption to apply the adviser must play their part in an advice process through which transactions occur in exempt products. Therefore, the litmus test advisers should apply is to look at the proposed outcome of their advice; if this relates to exempt products – then VAT exemption will apply.”
Andy Thompson, director of operations at Apcims:
“In the UK, DFMs do separate and invoice for these services separately. In addition, whereas the Deutsche Bank fee is a percentage charge based on the assets under management (AUM), transaction fees in UK DFM services are calculated based on the value/number of transactions executed.
“This makes it clear that the client is paying the fee for the execution of transactions, as opposed to the fee simply representing an additional AUM portfolio fee.
“Given this, we consider it would be artificial for HMRC to regard services with separately advertised, calculated and invoiced fees (as per standard UK practice) as a single taxable supply for VAT purposes.”
