Services of an insurance intermediary: introductory services: Retail Distribution Review - services and evidence
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:
- gather information about the customer (fact find)
- carry out research to find suitable investment options
- provide the customer with reports, financial health-checks, forecasts
- recommend specific investment products to the customer, including the prices at which these can be arranged
- act between the product provider(s) and the customer with a view to arranging the sale of the Retail Investment Products agreed with the customer
- and, where applicable, i.e. where the customer agrees to an ongoing review service, monitor the customer’s ongoing position to ensure that the products continue to meet the requirements of the customer
Where the customer is seeking the arrangements 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 carry 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).
If, after the arrangements of the sale of Retail Investment Products, the customer signs up to ongoing review services, some or all of the process may occur again. The adviser should be able to determine and evidence where they are in the process with that customer. The VAT liability of ongoing services will depend upon the services the customer has agreed the adviser should perform, as outlined above.
Without prejudice to the general VAT evidential requirements, an adviser will need to keep sufficient evidence to support the tax treatment applied to the services supplied. This evidence will need to be specific to the services performed for the customer and demonstrate that the adviser acted between the customer and the product provider with a view to arranging the sale of Retail Investment Products. If an adviser is unable to provide evidence that an exempt supply has taken place, VAT will be due on that supply.