Brooks Macdonald Asset Management  

Brooks Macdonald confirms it is scrapping VAT from MPS

Brooks Macdonald confirms it is scrapping VAT from MPS
Credit: Jason Alden/Bloomberg

Brooks Macdonald has confirmed it is ditching value added tax from its managed portfolio service as its review into the extra charge has concluded.

The discretionary fund manager said today (January 7) it had stopped applying VAT on its MPS, both those held directly and on third party platforms, from January 1 this year following guidance from HM Revenue and Customs.

It comes after Brooks told FTAdviser last September it would reduce the cost of the service for advisers if HMRC ruled in its favour as part of the firm’s review of its MPS. It was expected the taxman would do so, given the ongoing trend in the industry.

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Brooks said today’s change meant it could now offer its adviser partners and their clients “high-quality investment management services at an even more competitive price, regardless of the platform”.

The VAT scrapping trend

The question of whether VAT should be levied on MPS services surfaced last year when the taxman ruled Tatton’s MPS was exempt from the tax.

Other companies have since followed suit. Brewin Dolphin stopped charging VAT on its service in October, while in November FTAdviser revealed both Investec and Quilter had removed VAT from their respective MPSs.

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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