New Draft Guidelines issued by HMRC re Financial Services
HMRC are expected to issue new guidelines shortly relating to the VAT position concerning financial advice.
VAT will not apply to IFA-arranged transactions, including research, information gathering, investment advice and arranging the sale of a product.
However, services, such as tax planning and financial health checks, will be subject to 20% VAT.
Where advice is provided such as suggesting particular transactions to a customer, discretionary investment management services and ongoing advice it will be taxable at the standard rate.
Annual financial health-checks or reports on investment performance which do not involve the arranging of a transaction, will also be taxable at the standard rate.
VAT and caravan site operators
With effect from 1 January 2012, recharges of business rates and recharges of water/sewerage costs which are not metered to the individual customer at their pitch will follow the VAT liability of the pitch fee (generally standard rated, in the case of holiday/leisure sites, and exempt in the case of residential sites).
One off charges for the first time connection to gas, electricity, water and sewerage will follow the VAT liability of the pitch (exempt or standard rated) unless the site owner identifies and charges for individual consumption (that is, through metering to the individual pitch), in which case the charge will follow the VAT liability of the utility.
ECJ rules on treatment of supplies of exhibition stands
The supply of exhibition stands is normally subject to VAT where the event takes place but the ECJ has decided in a Polish case that when exhibition stands are designed or used for the purposes of advertising, hiring them out for use within and outside the EU can be viewed as a supply of advertising services and so is subject to VAT where the customer has established his business.
The ECJ considered that it would become excessively complicated to require VAT accounting in each country where a stand is used if it were to be used in a succession of locations. In such cases, the ECJ concluded that the supply might be treated as a hire of moveable property, again subject to VAT where the customer's business is established.
MTIC fraud still a problem
With the standard rate of VAT at 20% it hasn’t taken long for the potential fraud to re-emerge from mobile phones, CPU’s, fuel and power trading and now to trading in electricity.
Businesses involved in chain transactions should carefully perform due diligence checks where goods or services are sold in a chain. HMRC will impose measures against businesses that should have known that they were involved in a chain where transactions were potentially fraudulent.
Purchase and Sale of Debts is not a supply for VAT purposes
In the case of GFKL Financial Services AG Case C-93/10, the ECJ decided that a business which purchased defaulted debts at a price below face value does not effect a supply of services for a consideration and therefore does not carry out an economic activity. The transactions were therefore outside the scope of VAT.
Businesses that buy and sell debts should not have to pay VAT on the transactions and should review their procedures accordingly.