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Stuck in the middle with you

Stuck in the middle with you

Another topical area for us concerns intermediaries operating in the financial services and insurance sectors. Typically this includes IFA firms, IFA networks, aggregators and ‘comparison site’ operators.

The dividing lines between what activities are taxable and exempt in this sector have shifted many times over the years as the result of case law decisions and changes to HMRC policy.

It can be difficult for businesses operating in these industries to achieve clarity and certainty as to which of their income streams are subject to VAT and, consequently, which of their costs they can reclaim VAT on.

Success in this area will usually require:

  • careful analysis of income streams,
  • thorough review of contractual arrangements and supply flows,
  • detailed consideration of VAT on costs and the manner in which these should be attributed and apportioned between taxable and exempt activity, and,
  • constructive dialogue with HMRC to ensure that the business is fully VAT-compliant.

Experience has shown us that many businesses in this sector often encounter difficulties when they introduce new products and services. In some cases, these involve changes to the nature and flow of supplies which may seem relatively inconsequential – but can result in a radically different VAT analysis.

Key message: Review existing arrangements regularly and put VAT on the agenda when developing new products and services.

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