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AMI claims victory over network VAT clarification

Without its efforts it says there would still be a question mark over whether the VAT ruling would include mortgage networks. It is now clear that networks won&#39t have to pay VAT on the fees and commissions their appointed representatives generate.

Customs and Excise defines networks as firms that appoint and train appointed representatives in accordance with Financial Services Authority requirements, take liability for these same ARs and then subcontract their functions to the ARs.

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

The ruling also sets in stone that ARs must ensure clients write out all cheques to the network rather than the AR or risk paying VAT.

Chris Cummings, director of AMI, says: “Without our efforts to illustrate the actualities of how networks and their ARs operate, it could easily have saddled this side of the market with a 17.5% increase in costs with less than six weeks to Mortgage Day.

“With compliance costs already increasing due to FSA regulation, this would have been the worst possible time to destabilise the industry with such a major additional burden.”

However, other industry sources say AMI would have been better off leaving things alone, arguing that the VAT ruling could have dire tax implications for mortgage clubs and directly authorised firms.

One source tells Mortgage Strategy: “We were hoping that there wouldn&#39t be a clear ruling on VAT.

“This makes the rule for networks clear but on the downside it leaves mortgage clubs unsure of where they stand. The ruling didn&#39t go far enough.”

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