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Tax Tip

The Retail Distribution Review (RDR) and VAT 04/11/11

The Retail Distribution Review (RDR) is a key part of HM Revenue and Customs (HMRC) consumer protection strategy. It is designed to establish a resilient, effective and attractive retail investment market that consumers can have confidence in and trust at a time when they need more help and advice than ever with their retirement and investment planning.

The RDR aims to ensure that:
• Consumers are offered a transparent and fair charging system for the advice they receive and consumers are clear about the service they receive;
• Consumers receive advice from highly respected professionals.

New rules have been introduced to ensure the above
• Advisory firms to explicitly disclose and separately charge clients for their services;
• Advisory firms to clearly describe their services as either independent or restricted;
• Individual advisers to adhere to consistent professional standards, including a code of ethics.

These changes will come into effect on 31 December 2012 and will apply to all advisers in the retail investment market, regardless of the type of firm they work for (banks, product providers, independent financial advisers, wealth managers, stockbrokers). 

HMRC has proposed that where advisers arrange transactions for clients their services will continue to be exempt from VAT post-RDR, under draft rules published recently.

In a situation where advisers charge separately for advice not involving the arrangement of a transaction the service will be VATable. But where an adviser's ongoing advice service includes rebalancing of portfolios the service will be exempt.

If you need any help and advice for your business or financial planning don’t hesitate, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail:


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