HMRC Back down in VAT on Advice Fees Case

VAT on Advice Fees

HMRC have backed down in a landmark case that has been ongoing for the past 18 months. The case related to the payment of VAT on advice fees for Birmingham based Barnett Ravenscroft Wealth Management.

The case was opened when the firm asked for a £462,528 VAT repayment, relating to fees which it was charging out to clients. The claim, based on fees between 2012 and 2015, was on the basis that it was providing intermediary services through the use of a platform and should therefore be exempt. The claim was supported by the VAT Act 1994, as well as HMRC guidance at the time and the successful appeal of Bloomsbury Wealth Management over a similar VAT case.

Initially, HMRC refused the repayment request arguing that there was no VAT exemption for the introduction of the platform, saying it is the platform which contacts the third parties, as well as executes and makes the investments. However, rather than just refusing the refund, HMRC further claimed the firm had to pay back £160,000 in unpaid VAT on initial fees, stating: ‘the discrepancy in the VAT treatment of “initial fees” and “renewal fees” cannot be supported from a VAT technical basis’.

However, following a review, HMRC have backed down on its position and have agreed with Barnett Ravenscroft that the supplies can be treated as exempt.  The rebate refusal was cancelled and HMRC have said the initial refund request will be repaid.

This case further shows the intricacies of the VAT system and prompts questions over HMRC’s clarity on such matters.

To find out if you should be charging VAT on your product/service,  contact our dedicated VAT department, who’d be happy to help.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.