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VAT to be charged on Discretionary Management?

14 May

So,  with the European Court of Justice (ECJ) declaring discretionary services should be subject to VAT. Many will be effected by this, if it becomes legislation. Those effected with be anyone receiving discretionary management services, such as, through a Stock Broker, Discretionary Fund Manager, etc.

This announcement was in response to a question by the German high courts about Deutsche Bank’s VAT treatment of its discretionary services. The ECJ recommended all elements of Deutsche’s discretionary services – including initial charges – should be subject to VAT, backing a clarification by HMRC earlier this year.

HMRC has stressed that the statement from the ECJ is currently “just an opinion” and not a final decision. The final decision is expected to be made in Germany in the near future.

If this is the final outcome, there may be legal implications for the UK afterwards; and in this instance, the ECJ statement was “in-line” with the European Union’s taxation rules. On 29 February 2012, the HMRC issued guidance on fees and VAT preventing discretionary fund managers from NOT paying VAT in this manner. This is due to come into force in 2013 alongside the FSA’s RDR overhaul of financial advice.

Stock Broking and Discretionary Fund Management companies offer only a single packaged proposal and as such this is settled case-law that i.e. where a transaction comprises a bundle of elements, regard must be had to all the circumstances in order to determine whether there are two or more distinct supplies or one single supply.

Moreover, in certain circumstances, several formally distinct services which could be supplied separately must be considered to be a single transaction when they are not independent.

The advocate general concluded that the portfolio management services of the kind at issue “form a single supply for VAT purposes” and as such, these services do not fall within the exemption provided for on the common system of value added tax.

My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

FSA Fined Coutts & Co for Control Failings

26 Mar

There are clearly fundamental flaws within many banking institutions and Coutts is the latest to suffer a reprimand for their tardy and less than suitable attitude.

The FSA has fined Coutts & Co £8.75 Million for anti-money laundering control failings. These failings included taking reasonable care to maintain effective anti-money laundering systems and controls. The Financial Services Authority (FSA) said the failings at Coutts were ‘serious, systemic’, and led to an ‘unacceptable risk’. Tracey McDermott (acting director of enforcement and financial crime) at the FSA, said: ‘Coutts’ failings were significant, widespread and unacceptable. Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures.’

In October 2010, the FSA started an investigation following a routine visit and found a lack of robust controls and consistent monitoring. A sample of 103 files of politically exposed persons were examined and 71% had deficiencies (i.e. in 73 or the 103 files examined).

Financial Services Authority (FSA) Announces Pension Transfer Rules are Being Aligned with The Board of Actuarial Standards

28 Feb

I’m pleased to see that the rules are being aligned so both groups will use the same rules and assumed parameters.

The Financial Services Authority (FSA) has outlined plans to change the way pension transfers from defined-benefit to defined-contribution schemes are calculated. The idea being to prevent Defined Benefits being undervalued by the Scheme.

The FSA says the proposed changes :-

  • will ensure assumptions used to calculate pension transfers are consistent and growth rates used for illustrating the comparison to the member are “reasonable”
  • the rules for calculating life expectancy (mortality) will be aligned with those used by the Board for Actuarial Standards, making them consistent with the annual pension statements personal pension holders receive
  • changing the inflation measure used in pension transfer assumptions to take account of the Government’s decision to switch to CPI indexation
  • annuities will be calculated on a gender-equal mortality rate in line with the European Court of Justice’s decision in March 2011
  • the comparison provided to the member when a transfer takes place will have to take into account the likely returns of pension fund assets as well as the transfer of risk from the Defined Benefit Scheme to the member

Any questions please email me :-

Financial Ombudsman Service Top Ten Business Groups Complaints List

28 Feb

Someitmes, as the adviser, you forget the quality of service offered in the “advice” world and so it is healthy to review the stats just to remind oneself.

I am a financial adviser (IFA) who has specialised in Investment & Tax Planning. I spend my working life trying to do the best for my clients. It is clear to me that each and every one who I advise, support and guide have placed their trust, wealth and financial well-being in my hands. I will always do my very best fopr them, wherever I can.

In comparison, the volume and type of complaints clearly identify that there are moany out there whos’ role is simply to sell whatever they can and without due care and consideration for the end user – there clients.

I think the figures speak for themselves.

The Financial Ombudsman Service deals with complaints about financial products, sales and associated issues. The majority of these complaints were upheld i.e. 93% against RBS, 87% against Lloyds TSB, 84% against Barclays Bank, 80% against HSBC, and 55% against Santander.

Payment Protection Insurance claims – 11% upheld against Capital One, 98% against Black Horse, 99% against Lloyds TSB, and 87% against HSBC.


Lloyds Banking Group Revamping its Financial Advice Arm

23 Feb

Lloyds Banking Group has announced it’s planning to revamp its direct financial advice arm. This is in relation to RDR .

What is the Retail Distribution Review (RDR) – this is a key part of the consumer protection strategy being introduced by the start of 2013. It is establishing a resilient and effective retail investment market, where consumers can have confidence in the advice and help they receive through financial advice on retirement and investment planning. 

In preparation for the RDR, Lloyds Banking Group is the latest bank to change its’ offering. They have stated they plan to split the offering between basic protection advice and a “financial planning” service. They have not confirmed if this will be provided by sales people or if they plan to offer an advice service (other than in name).

Lloyds currently operates an advice/sales team offering investment and protection products across its branch network, which includes Lloyds TSB, Halifax and Bank of Scotland.

 Lloyds refused to disclose details of the current size of its branch staff network dedicated to financial product sales but under the new structure the number of staff dedicated to this area of their business is expected to grow.

They have published, no decisions have yet been taken over how to charge customers for its financial planning service. Although, Ernst & Young suggested banks would have to charge clients at least £200 an hour just to cover costs after the RDR. (Assessment and report was in 2011.) Personally, assuming Ernst & Young’s figures are correct, this raises a concern how much will banks’ charge to offer financial services products to their customers.

A Lloyds spokesman says: “Customers require advice and support to understand and make decisions about their financial future and we are very well placed to take advantage….”

“As the IFA sector moves up market, there will be significant opportunities for bancassurers….through their high-street branch network.”

Last year Barclays closed its advice arm while HSBC cut 460 “financial planning managers” due to the RDR.

Payment Protection Insurance Mis-selling Claims Paid Over £2bn in 2011

22 Feb

 Be aware of the difference between financial product sales and financial advice.

The claims paid in 2011 for Payment Protection Insurance (PPI) mis-selling almost reached £2bn in December 2011 (figures provided by the Financial Services Authority (FSA)).

If you are a victim of this mis-selling, complain and ask for compensation; it is your legal right if you suffered at the hands of this horrendous treatment. Although, please do not take advantage of the system if you are not a victim of this crime. The concern being, there is growing support for the mentality to accuse, sue and/or exaggerate to make a financial gain, no matter that you didn’t suffer the crime. Please utilise your Rights but don’t abuse your Rights.

In this case there is no smoke without fire as the final cost of payments for actual mis-selling is expected to reach possibly over £8bn


Lloyds takes back £2m of bonuses paid to executives (Article in BBC Business News on 20.02.2012)

20 Feb
Lloyds Banking Group is taking back bonuses worth £2m from 10 executives, including the former chief executive Eric Daniels, the BBC has learned.

Four of those affected were board directors.

Mr Daniels is expected to lose between 40% and 50% of a £1.45m bonus, or between £600,000 and £700,000.

BBC business editor Robert Peston says they are being penalised over their role in the mis-selling of payment protection insurance (PPI).

This involved the sale of insurance that, in theory, covered repayments if borrowers were unable to continue repayments through illness or unemployment, but in many cases those taking out the policies would not have been eligible to claim on them.

Our business editor says three other board directors are expected to see about £250,000 of their bonus taken from them.

About six other executives, below board level, would lose around £100,000 each.

This is the first time a British bank has taken back bonuses from executives, following a financial performance that was worse than expected.

“The clawback of bonuses is important for its deterrent effect”

The return of some of the bonuses, which were demanded by regulators after the banking crisis of 2008, are being made after pressure from politicians and the Financial Services Authority.


Lloyds Banking Group is the UK’s biggest lender and owns the Halifax, the Bank of Scotland and the Cheltenham and Gloucester.

It has been forced to set aside £3.2bn to cover compensation for those customers who were mis-sold PPI.

The bank will publish its results this Friday and is expected to announce a loss of about £3.5bn.

The bank has not yet formally announced its plans for the return of some of the bonus money.

Its current chief executive, Antonio Horta-Osorio, said in January he would not take an annual bonus for 2011.

Our business editor says the move may have a deterrent effect in future, making bankers more likely to consider the consequences when they launch new products or do assorted deals.