HMRC internal manual

VAT Finance Manual

VATFIN7665 - The Retail Distribution Review - services of an adviser

An adviser’s role in the retail investment market will normally involve them entering into arrangements with the customer under which they might:

  1. gather information about the customer (fact-find)
  2. carry out research to find suitable investment options
  3. provide the customer with reports, financial health-checks, forecasts
  4. recommend specific investment products to the customer, including an indication of the prices at which these can be arranged
  5. with the agreement of the customer, contact the product provider(s) on their behalf and act between the provider and the customer with a view to arranging the sale of the Retail Investment Products
  6. and, where the customer agrees to an ongoing review service, monitor the customer’s ongoing position on a periodic basis to ensure that the products continue to meet the requirements of the customer

Where the customer is seeking the arrangement of a Retail Investment Product and the adviser performs the arrangements as outlined at stage 5 above, (regardless of whether the sale of the product is finally concluded): and is able to evidence that they have done so; the services in stage 1-6, which fall within the agreement concluded with the customer, will be VAT exempt.

Where there is no evidence of such product arrangement services or where one or more of the stages are contracted for under a separate agreement, so that the service provided to the customer is that of general advice or recommendation only, any charges to the customer will be liable to VAT at the standard rate.

The VAT liability depends on what is done by the adviser and it makes no difference whether a fee is levied up front or over the life of a product (as for example with Regular Contribution products).