Tilney Smith and Williamson has ditched value added tax from its managed portfolio service, becoming the latest in a string of providers to scrap the bill for advisers.
The financial group, recently created by the merger of Tilney and Smith & Williamson, announced today (December 15) it would stop applying VAT to its MPS propositions from January 1.
The move means VAT will no longer be charged on the Smith & Williamson MPS, the Tilney MPS, the Tilney platform model portfolios and the Tilney Sustainable MPS.
Mickey Morrissey, head of distribution at Smith & Williamson Investment Management, said: “Following discussions with HMRC, we are pleased to be removing the VAT charge from our MPS.
“This will be welcome news not only for financial advisers who invest in our service, but also, importantly, for end clients.”
Craig Wright, head of Tilney for Professionals, said it was a “positive development” which would allow financial advisers to offer their clients “high quality investment management services” at competitive pricing.
Mr Wright added: “The reduced costs resulting from the removal of VAT will provide a direct benefit to the end investor.”
The VAT scrapping trend
The question of whether VAT should be levied on MPS services surfaced earlier this year when the taxman ruled Tatton’s MPS was exempt from the tax.
Other companies have since followed suit. In September Brooks Macdonald said it was carrying out 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 in October.
Most DFMs are seeking an individual ruling from HMRC on whether VAT is payable on their MPS, though the taxman has now told multiple firms to ‘self assess’ the situation.
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.
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