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THE VAT DEBATE: Who’s paying what

The long debated issue as to whether mortgage clubs and packager associations should pay VAT does not look set to disappear, so has conducted its own vox pop to see where the industry stands.

John Rice, managing director, Regulatory Alliance of Mortgage Packagers

When we formed RAMP in 2003 we weren’t sure what the position would be regarding VAT, so we spoke to our accountants and they thought we would be VAT liable. When we established the company I was aware that the only other alliance in existence at that time wasn’t paying VAT, so I went to an accountancy firm that were tax specialists. The accountants came back to us and were of the view that we shouldn’t be paying VAT, they appealed it on our behalf and used various angles to say we didn’t have to pay it. However, HM revenue & Customs came back and said that no we did have to pay it, so we do pay it. We pay VAT on all of our income, it clearly is a huge competitive advantage for alliances that don’t. I am in the position where I have had to make some redundancies, that wouldn’t have happened if I didn’t have to pay VAT.

John Malone, managing director, Premier Mortgage Service

I have been doing for years the same thing as I an doing now, it is a commercial matter and nothing to do with other firms. If they are paying VAT let them pay VAT, when HM Revenue & Customs comes to me then I will discuss it with them. There are a lot of different businesses being run in the market and they are not all comparable.

Nick Baxter, director, Mortgage Promotions

Mortgage Promotions never sees a borrower, never completes a mortgage application form and never carries out any preparatory work that leads to the completion of a mortgage. We are a business to business marketing business, not a consumer business. Therefore, we have always paid VAT on our share of the procuration fee, override or marketing allowance. If other businesses with similar models aren’t, we look forward to claiming our VAT payments back.

Alex Murray, group director of mortgages at the Thinc Group (Thinc Mortgage Club)

As a company we are VAT registered, we understand that VAT does not have to be charged if the fees are linked to a potential sale.

John Mawdsley, spokesman, Association of Mortgage Packagers and Distributors

AMPD is registered with HMRC for VAT purposes and we pay VAT on the fees that we receive from lenders. That is not the same as paying VAT on proc fees or packager fees, because my understanding of it is that if you get paid a fee from a lender for things that are not within the advice chain that is then liable for VAT. I get paid a packaging fee from a lender and that is deemed to be part of the advice process, but we are part of the advice process, so we don’t have to pay VAT on those fees. However if we are a club or a an association and we get paid fees by lenders for other activities, say marketing or distribution then that is not deemed as part of the advice process.”

Patrick Day, managing director, Freehold

All this is opinion and not fact as it hasn’t been tested in court, our opinion , if a marketing allowance is paid whether on a completed case status or not that would be a taxable supply of marketing services to the lender, this is our own opinion from an association point of view. However if you look at networks they could be deemed as being a form of association, however they are bringing together person who seek financial services and those that provide them, the question is whether associations or clubs bring together , our view is that as they stand they don’t bring together, but they supply marketing services which they are paid by the lender, so that is liable for VAT.


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