Management of investments, portfolios, funds, ‘wrapper’ products and related services: self-invested personal pensions (SIPPs)
What is a SIPP?
A SIPP is a type of personal pension scheme that is aimed at people who want to control their own investments. The SIPP itself is a tax efficient pension ‘wrapper’ that holds investments until retirement. Most SIPPs allow investment in a range of assets, including collective investment funds and commercial property. As with any pension fund, the investor cannot take money from the fund until the age of 55.
SIPPs fall into two main categories; those provided by insurers under contracts of insurance and those that are not. Where the SIPP is provided under an insurance contract (insurance backed SIPP) the VAT treatments outlined in the VAT Insurance guidance (at VATINS1000) will apply
For insurance backed SIPPs, supplies of introductory and administration services made by IFAs, brokers and other intermediaries will generally be exempt under the insurance exemption in VAT Act 1994 Schedule 9, Group 2, Item 4
For SIPPs that are not provided under a contract of insurance (non-insurance backed SIPPs) any fees that are charged for arranging the purchase of exempt financial products to be held within a SIPP wrapper will be exempt under VAT Act 1994 Schedule 9, Group 5, item 5. Any charges made for introductions to SIPP providers (as opposed to the products held within the SIPP) will be taxable.
Supplies general to both insurance backed and non-insurance backed SIPPs
Any charges made to the customer (either directly or by deduction from the funds held within the SIPP) for investment advice and/or the ongoing management of the investments within the wrapper will be for taxable supplies of investment advice/management. This only applies to investment management services supplied to the individual investor and not to charges for the management of collective investment schemes. Please refer to VATFIN5800 for more information on this.
Supplies of introductory services made by IFAs to an investment advisory or discretionary investment management service, whether or not the respective assets are to be held within an insurance backed or non-insurance backed SIPP wrapper, are taxable supplies.
Charges made by the SIPP provider (establisher, operator or trustee) for the general administration/management of the SIPP will be for taxable supplies unless the SIPP is provided under a contract of insurance and the services fall within the insurance exemption, as outlined above and in the VATINS guidance.