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HM Customs rules against VAT on network fees

There has been mounting confusion over exactly what the VAT treatment of services supplied by ARs operating under networks would be.

But in a Business Brief released last week Customs defines networks as firms which appoints, trains and takes liability for ARs in accordance with FSA requirements and then subcontracts its functions to those ARs who interact directly with the client and the product providers on behalf of the network.

Any network that comes under this definition will be exempt from paying VAT on income derived from fees and commissions and the onward payment to the ARs is “consideration for the AR&#39s VAT exempt intermediary services supplied to the network.”

However, fees, whether paid direct to the network or to the AR, in respect of regulated advice only services, which fall outside the exemptions for intermediary services, are the network&#39s standard rated income.

And any onward payment made by the network to the ARs will be liable for VAT and will be due if the AR is registered or required for VAT.

Networks that just offer marketing or compliance support will face a different VAT treatment.


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