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HMRC internal manual

VAT Insurance

Services of an insurance intermediary: introductory services: Retail Distribution Review

New Regulatory rules come into force on 31 December 2012 following the FCA’s Retail Distribution Review (RDR). The key objectives of the RDR are to:

  • improve the clarity with which firms describe their services to consumers
  • address the potential for advisers remuneration to distort consumer outcomes and
  • increase the professional standards of advisers

The new rules require advisers to move from receiving commissions to fees agreed with customers in respect of all Retail Investment Products as defined by the FCA, which are:

  1. a life policy; or
  2. a unit; or
  3. a stakeholder pension scheme; or
  4. a personal pension scheme; or
  5. an interest in an investment trust savings scheme; or
  6. a security in an investment trust; or
  7. any other designated investment which offers exposure to underlying financial assets, in a packaged form which modifies that exposure when compared with a direct holding in the financial asset; or
  8. a structured capital-at-risk product 

whether or not any of a to h are held within an ISA or CTF.

Retail Investment products do not include protection-only insurance or charges for trading in securities.

The new rules apply to all product distributors and providers across the retail investment market involved in advised-sales. They also apply to advised-sales via platforms. These rules do not apply to investment management under a discretionary mandate or to execution only transactions which are covered in other sections of VAT guidance (see VATFIN7530 and VATFIN5800).