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Investec scraps VAT from 0.2% MPS range

Investec scraps VAT from 0.2% MPS range
 Credit: Chris Ratcliffe/Bloomberg

Investec has removed value added tax from its managed portfolio service range, lowering the cost of the service for advisers.

It announced this morning (November 25) it would no longer be charging VAT on its MPS on adviser platforms from December 1.

Advisers had previously paid 0.2 per cent + VAT on the service, but will now be charged just the 0.2 per cent management fee.

John Cowmeadow, head of intermediary sales at Investec, said: “Our low cost MPS has already had a fantastic reception in the market and we are delighted we can now offer the service to advisers and their clients without VAT. 

“This move further widens the price gap between Investec’s MPS and the competition.”

Investec’s MPS range relaunched in September to meet adviser demand and is available on most adviser platforms.

It has since received a ruling from HMRC that it could self-assess whether VAT was due on its MPS.

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 the discretionary fund manager's 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.

Other DFMs have followed Tatton’s lead. 

In September Brooks Macdonald said it was undergoing a review of its MPS and was seeking a ruling that it was not subject to VAT, while Brewin Dolphin stopped charging VAT on its service from October 1.

FTAdviser has learned that most DFMs have sought an individual ruling from HMRC on whether VAT is payable on the management of its portfolios.

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

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

The trend has 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.

It also rekindled concerns that with many DFMs adopting a centralised MPS, advisers needed to understand whether they were offering a truly discretionary, bespoke service to the client.

imogen.tew@ft.com

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