Tax and the Single Platform

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Lee Todd
5 years ago
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$platform Daniel Lyons \ 23$ June 2014 A (typical?

1 VAT and the single platform Daniel Lyons \ 23 June 2014 A (typical?) scenario Product provider Adviser 150 bps Platform Service Fund Investor = Supply = Money 6 1

2 Antique VAT legislation The challenge facing us all Art 135(1) Member States shall exempt the following transactions: a) insurance transactions, including related services performed by insurance brokers and insurance agents d) transactions, including negotiation, concerning deposit and current accounts, payments f) transactions, including negotiation but not management or safekeeping, in shares and other securities g) the management of special investment funds as defined by Member States 7 The UK legislative interpretation a) The Finance Exemption (Group 5, Schedule 9) including: any dealing with money; the issue, transfer or receipt of securities; the intermediary services in relation to the above; and operation of a bank account b) The Insurance Exemption (Group 2, Schedule 9) including: insurance transactions; and the services of an insurance intermediary 8 2

3 Notable absences What s not in the (UK) legislation includes: any mention of platforms ; any mention of defined contribution pension funds as special investment funds ; any mention of life funds a special investment funds ; a definition of discretionary fund management; and no clarity about charges made by a platform and charges made through a platform 9 HMRC: trying to make sense of it all The VATFIN manual Extant guidance is not helpful as it does not really mention platforms Also the VAT liability of a wrap depends on the nature of the supplies made. In case of doubt, please contact HMRC! However, there is draft guidance which has still to reach a final version I am going to focus on that draft guidance 10 3

4 VATFIN5500 (draft) ( investment platforms ) At last a definition of investment platform The platform fee paid for the primary service of the investment platform is VAT exempt (transfer and receipt of securities, intermediation thereof) Liability of other services will depend on what s provided Advice, information, research and market data services = standard-rated If the platform supplies additional portfolio management services = standardrated 11 VATFIN5600 (draft) ( tax efficient wrapper products ) Cash mini ISA the ISA manager s charge is exempt (operation of a bank account) unless based on cash unit trusts (standard-rated); Insurance mini-isa HMRC are not sure (probably exempt ); Share mini ISA arranging the purchase of securities is exempt but portfolio management is standard-rated; Junior ISA as above; Child Trust Fund if provided as a savings account charges will be exempt (operation of a bank account) 12 4

5 VATFIN5700 (draft) SIPPS Charges from IFAs, brokers and other intermediaries will be exempt (insurance intermediation) Charges for the provision and administration of the SIPP made by the SIPP provider will be standard-rated d t d( ( regardless of the nature of the provider and the nature of the products invested in ) Overall investment portfolio management is standard-rated 13 Adviser charging (1) (A post RDR refresher) Exemption applies where the adviser: 1. Gathers information about customer; 2. Researches suitable investment options; 3. Provides the customer with reports, financial health-checks, forecasts; 4. Recommends specific retail investment products and advises on pricing; 5. Arranges acts between provider and customer with a view to arranging sale/purchase; and 6. Monitors customer s ongoing position to ensure requirements continue to be met If there is evidence of: 1. Customer s agreement to the arrangement of a retail investment product; and 2. Actual performance of resulting arrangement function 14 5

6 Adviser charging (2) (A post RDR refresher) Non-discretionary fund management (brokerage/execution) is exempt Discretionary fund management is standard-rated Deutsche Bank case discretionary and execution elements were so closely linked that they constituted a single (standard-rated) supply 15 The wider perspective Management of a special investment fund is exempt What s a special investment fund? OEIC, authorised unit trust of course! Defined Benefit pension scheme no (Wheels) Defined Contribution pension scheme yes (ATP) Life Fund - maybe 16 6

7 Why insurance is special Pension fund management is a class of long term business Therefore, where fund management is supplied by a life insurer, it is automatically exempt This has led to many life insurers having regulated pension fund managers in their groups Fiscal neutrality challenge by corporate pension scheme place of supply changes place of supply of electronically supplied services will, on 1 st January 2015, change to the location of the consumer (i.e. B2C) Impact on non-uk customers For example, in France, platform-related services would be standard-rated 18 7

Making Sense of VAT & the Provision of Financial Services

Making Sense of VAT & the Provision of Financial Services For Sense Network Appointed Representative use only - not to be distributed to clients or other third parties VAT and the Provision of Financial