The guidance confirms that VAT is only payable where the IFA provides advice, not where financial products are sold. Where an IFA’s client wants advice and buys a product, the IFA must determine which is the ‘predominant service’ and that will determine the VAT treatment.
Clearly there are a number of ‘grey areas’ in these supplies. However, attempting to split the two supplies for VAT purposes may not be effective: if what is supplied in fact is a single supply, then the correct VAT treatment will be to add VAT (or not) depending on which is the predominant element of the supply.
IFAs should ensure they are fully aware of the relevant rules in order to minimise the likelihood of a challenge from HMRC, who can assess any underpayments of VAT during the previous four years.