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I don’t understand Richard Griffiths’ stance on VAT

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
Chartered accountant
By email

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