From Ian Dalzell
While I agree that it was somewhat lax on the part of Network Data not to warn its advisors that VAT could be payable on their membership fees, I do not understand where Richard Griffiths is coming from.
Where brokers receive commission it is exempt from VAT (see VAT Notice 701/49) and brokers should not register. They can’t claim VAT back on any inputs (e.g. stationery – not just network fees).
Indeed, if their income is all exempt from VAT, HM Revenue & Customs will not register them because they are not making “taxable supplies”.
It is only where a fee is charged to a client for advice that a supply becomes VAT-liable. If the business also receives commissions it becomes “partially exempt”.
Such firms, where they are registered, can only claim a proportion of their VAT back under partial exemption rules. Applying these rules is not, as Griffiths states, “just a little extra paperwork”. There is whole lot more to it than that.
Also, if most of the income of a broker is from commissions, little VAT will be recoverable by even a VAT-registered broker.
Griffiths might be right in saying that “ARs that aren’t VAT-registered at the moment can’t claim this money back”, but it is likely that most brokers who are registered (and partially exempt) can’t reclaim it either.
Ian Dalzell MA FCA