Earlier this year HM Customs & Exercise ruled that the services provided by two IFA networks to members were liable for VAT.
The two networks concerned together with AMI challenged the ruling and there has now been a final decision on the issue.
Networks have been assured by HM Customs that “if the new networks are structured in exactly the same way as the current IFA networks, then it can be taken as read that the VAT treatment will be the same – the fact that the intermediaries may not call themselves IFAs and will be selling a different regulated financial product would not in itself make any difference”.
It also said that provided networks and their members adhere to the criteria from the briefing there would be no retrospective taxation.
Chris Cummings, director of AMI said: “We welcome the clarity which has been achieved and are pleased with the outcome”
However AMI warned that those companies who provided ‘network-style’ services to directly authorised intermediaries could be treated differently for VAT purposes.
Commenting on the development Rob Clifford, managing director of Mortgageforce, said: “Seeing that lenders pay an insufficient fee to brokers for the work they do it would have been impossible for brokers to operate with an additional 17.5 per cent burden. Lenders would have had to increase proc fees.”
He added: “This is good news for brokers and lenders but I suspect that some clubs and packagers will have to fight local battles with VAT inspectors over the exact definition of intermediation.”
