As a forward thinking financial planner, keen to ensure that our clients get the very best advice, last night I attended a seminar at the Chartered Accountants Hall in London. The focus of this was in relation to the interpretation of VAT rules and how this will be new for most financial advisers from 2013. Anyone that knows Solomon’s, will be aware that we have always operated on a fee basis. Anyway, (yes it was a dry topic) there has been something of a spat between the HMRC, FSA and IFA trade bodies as there is a significant degree of uncertainty about what is and what is not liable to VAT, so as you might imagine a fair number of advisers are not only concerned about charging fees for the first time, but also becoming VAT registered. One interesting point, was that under current understanding, any IFA that uses a Discretionary Fund Manager (DFM) service will have to apply VAT to this. In recent times, many IFAs have been encouraged to outsource their client investment services to “Discretionary Fund Managers” and continued to be paid as though looking after the client money. I have not been tempted by this, primarily because for our clients this is largely an unnecessary additional cost and one that does not appear to provide better results for clients. Anyhow, if the ICAEW interpretation of the rules is right anyone who has an adviser that uses DFMs will have a further 20% of VAT to add to the bill, making outsourcing investment advice less attractive.

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