Model Portfolios  

Sanlam latest MPS provider to scrap VAT

Sanlam latest MPS provider to scrap VAT

Sanlam has joined a growing list of wealth managers who have removed VAT from its model portfolio services.

The firm said the change would "further enhance the appeal of Sanlam’s proposition and will apply to all MPS where there is no personalisation at an investor level".

The active, index and socially responsible strategies are among the models impacted by the change. 

Sanlam said that it is working closely with all of its distribution partner firms to expedite the move.

The planned change is due to come in on April 1, with the wealth management firm saying that "every endeavour" is being taken to implement the change on schedule.

However, it notes that there are expected operational challenges in implementing the change across multiple platforms.

Sanlam says that it will brief individual IFA firms over the coming days and weeks in respect of the specific timelines for the changes depending on which platforms assets are held. 

Sanlam has become the latest firm to follow the example of Tatton, which scrapped VAT on its MPS after HM Revenue & Customs gave the company a refund and ruled that discretionary fund managers supplying model portfolio services were exempt from the tax.

This lead to a flurry of other DFMs following suit.

Last year Quilter scrapped VAT from its MPS offering, and shortly after that it was followed by Investec.

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.

FTAdviser understands most DFMs have sought an individual ruling from HMRC on whether VAT is payable on their MPS.

The taxman has now told multiple firms to ‘self assess’ the situation.

MPS fees have been experiencing downwards pressure in recent years, with firms charging as low as 0.15 per cent.

With DFMs across the market looking to knock VAT off the price, it is expected that the average price will continue to fall.

Experts have been encouraging advisors to check the amount of cash they were forking out for DFMs, saying that it was likely some DFMs were levying VAT on their service just because it was the norm.