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HMRC internal manual

VAT Finance Manual

HM Revenue & Customs
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Intermediaries: Brokers: Background

If the broker is an execution only broker buying or selling securities on his client’s instructions, but does not offer advice on securities, his supply is exempt.

If the broker is an advisory broker arranging transactions and offering investment advice to clients then his supply is:

  • taxable if advice is made as a separate supply and for an identifiable charge;
  • exempt if the contract with the client is for arranging transactions in securities and the broker raises charges only in relation to transactions executed, and his advice is incidental to that service.

If the broker arranges a securities transaction, he may split the contract note to show as separate items the basic charge for his broking service and any compliance and regulatory charges which he makes to cover the cost of meeting regulatory requirements. These additional charges are part of the consideration for his exempt broking service. This rule does not apply to any statutory levies such as stamp duty that are a liability of the client. These are outside the scope of VAT and need not be accounted for as part of the broker’s exempt supplies.