Tax  

Update: Brewin to review if MPS tax refundable as VAT scrapped

Update: Brewin to review if MPS tax refundable as VAT scrapped
 Credit: Bloomberg

Brewin Dolphin is to “review” if the value added tax previously charged on its managed portfolio service is refundable from the taxman after scrapping the tax from its products.

Earlier today (September 30), the discretionary fund manager announced it had taken the decision to remove VAT across both its active and passive plus ranges, covering all its MPS models, from October 1.

This came after HMRC confirmed it could self-assess whether VAT was due on its MPS.

Brewin Dolphin told to FTAdviser that VAT incurred up to today would be paid to HMRC.

When asked if Brewin Dolphin would ask for a refund on the VAT previously paid — and if this would be passed onto advisers or investors — the DFM said its "immediate priority" was to remove VAT from October 1, but it would then "review" the retrospective tax position.

Anthony Champion, head of intermediaries, said: "HMRC has now confirmed that we can self-assess whether VAT is due on our MPS. We have reviewed the tax rules and we are confident that VAT should not apply. 

“We have always maintained tax should not be a competitive advantage. We are delighted to be in a position to be able to remove it and we are working with our platform partners to remove VAT at the earliest opportunity.”

The question of whether VAT is leviable on MPS services surfaced earlier this year when the taxman ruled Tatton’s MPS was exempt from the tax.

In June, Tatton’s accounts revealed it had received a refund of £1.7m after HMRC agreed with the asset management firm that VAT was not payable on DFMs supplying managed portfolio services.

Tatton had not charged its adviser clients VAT, instead covering the costs itself, as it had always thought HMRC would find in its favour.

At the time, FTAdviser learned that in order to determine whether VAT is payable on the management of portfolios, a business would have to determine whether the fund meets the conditions to qualify as a special investment fund.

Therefore, each DFM will have to receive its own ruling from HMRC.

Other DFMs have followed Tatton’s lead. 

Earlier this month Brooks Macdonald said it was undergoing a review of its MPS and was seeking a ruling that it is not subject to VAT. A submission has been made and the firm is awaiting a response from HMRC.

It pledged to lower the cost of its MPS for advisers if the taxman ruled in its favour.

MPS fees have seen downward pressure in recent years, with firms charging as little as 0.15 per cent.

With DFMs looking to HMRC to knock VAT off the price, it is likely the average price will slip further.

The ruling triggered experts to encourage advisers to check the amount of cash they were forking out for DFMs, with some saying it was likely some DFMs were levying VAT on their service just because it was the norm.