Financial Services

VAT has always been a contentious subject within the financial services sector, with many businesses entering into a variety of structures and arrangements to mitigate the impact of irrecoverable VAT costs. The VAT Consultancy is well placed to work with businesses to advise, assist and implement efficient and effective structures for VAT purposes.

VAT is becoming an increasingly important and complex tax. Not only does it create a significant compliance burden but at the current standard rate of 20% it also represents a considerable ongoing cost for an FS business which will typically only recover a small percentage of the VAT incurred on costs. In addition the sector is subject to frequent and significant VAT case law developments, for example the recent Deutsche Bank case impacting the Fund Management Sector. This developing body of case law precedent combined with regulatory and HMRC policy changes generates both opportunities and risks from an Indirect Tax perspective.

We can assist organisations in the FS sector by:

  • Identifying opportunities to enhance the recovery of residual VAT by renegotiating your partial exemption method
  • Advise on ensuring that any outsourcing arrangements are as VAT efficient as possible to minimise the VAT cost suffered by the business on buying in services
  • Review current arrangements to test for compliance with VAT regulations and understanding
  • Assist in structuring businesses to reduce irrecoverable VAT costs being generated within the structure
  • Determining the correct VAT liability of supplies, particularly in respect of new offerings and or a change in regulation

The VAT Consultancy has been actively involved in advising a number of clients in relation to the impact of the FSA’s Retail Distribution Review (RDR). The sector will need to ensure that it is on track with the outcome of the RDR and the revised approach to adviser charging which is effective from 1 January 2013. IFAs will need to understand how these changes impact on their own business, and the way in which fees are charged for advice and product sales.

In addition we are advising a number of businesses operating in an online environment on the question of whether they meet the definition of an ‘intermediary’ for VAT purposes – an area of the industry HMRC are heavily focused on.