RDR: A year on
The Retail Distribution Review was a year old on 1 January 2014. Most people won’t have broken out the bunting, or even noticed – but the change in the way financial advisers are supposed to charge customers for their services has had a big impact on those who sell and advise on insurance, investments and borrowing. In general, intermediaries are supposed to charge fees to their clients, rather than receiving commission on the transaction paid by the supplier of the financial product.
One aspect that is still creating uncertainty is how those fees are treated for VAT. Traditionally, all financial commissions were treated as exempt from VAT – but fees might be VATable. It depends on the nature of the work the adviser or intermediary is doing. When most income was exempt, most advisers wouldn’t have to register for VAT – now, they might go over the £79,000 annual limit.
IFAs should make sure they have considered their VAT position – we’ll be happy to help.