Pension providers have called for HM Revenue and Customs to ensure consistency in the application of VAT charges on self-invested pensions, after the Revenue confirmed it was in talks with the industry over its approach.
HM Revenue and Customs confirmed to FTAdviser it is reviewing the VAT treatment of self-invested pensions, with finalised guidance expected to be published in March or April 2014.
Currently Sipp charges are subject to VAT unless the provider is an insurance company benefitting from an exemption for insurance related activities, following a landmark tribunal ruling in 1997.
An HMRC spokesperson told FTAdviser: “HMRC is currently in the process of reviewing and updating its guidance on the VAT treatment of charges made in connection with the provision of SIPPS and will be informally consulting with industry reps on this.
“HMRC hopes to have the finalised guidance published in March/April.”
Tax-Incentived Savings Association technical director Jeffrey Mushens told FTAdviser that it is meeting with representatives from HM Treasury on 27 February to discuss the different business models across the sector.
This follows reports on a confirmation in draft HMRC guidance that it will not levy VAT on platform charges in a move several platform industry insiders described as being widely expected.
Discussing the platforms decision, Bill Vasilieff, chief executive at Novia, said: “It was an expected move - they wouldn’t have gone any other way. Of course it’s good news as it’s one less tax and ultimately the investor will benefit.”
On the application of VAT to Sipps, Mr Vasilieff said it would be “quite tricky” to impose the tax on all Sipps, as in addition to the existing discrepancy some platform providers offer Sipps that do not carry additional charges.
He added: “We do not impose a specific Sipps charge. A Sipp, in a sense, is a platform, so it would be very confusing if HMRC did impose VAT. I don’t know how that would work.”
David Fox, director of sales and marketing at Dentons: said: “What is more important and fair to all concerned is for HMRC to be consistent with all providers across the industry and ensure that every provider is subject to VAT on their Sipp fees, which for one reason or another is not the case at the moment.”
Mike Morrison, head of platform proposition AJ Bell, agreed consistency of treatment was important, saying the application of VAT should be based on the original definition of value added services.
He said: “Custodianship does not attract VAT so HMRC must apply consistency across the board. We don’t want lots of different changes on VAT to some parts but not others as this will be confusing for clients and will be hard for providers to administer.”
Martin Tilley, Dentons’ director of technical services, added there has always been a “blurred line” between packaged platform Sipps and the full, wider investing Sipps.
He said: “The argument over calling the former ‘Sipps’ has raged for some time and without satisfactory conclusion because of the number of providers that offer both types of scheme scheme or something in between.
“Without any clear dividing line, consistency across the whole of the marketplace is essential.”
Greg Kingston, head of marketing at Suffolk Life, said: “Where there are similarities between platforms and Sipps it shouldn’t be a surprise that there’s a desire to simplify and standardise policies where possible and appropriate.”
Ken Wrench, chif executive at London and Colonial said: “Personally I don’t think that the removal of the 20 per cent rate of VAT on Sipps would have any significant effect on the amount people invest into their pension schemes.
“With all of the bad publicity that the pension’s industry has attracted over more recent years, any news that encourages people to view their pension in a more positive light cannot be a bad thing.
“However, there is no justification in singling out Sipp in isolation for such a VAT reduction, and they certainly shouldn’t be given preferential treatment over other schemes such as Ssas.”
