VAT rules penalise clients paying in instalments

Investors who choose not to pay for advice up front will be subject to 20% VAT on future ongoing payments, or 17.5% for advisory services supplied before the tax rate rises on 4 January 2011. The rules, which apply now, mean investors will face different costs depending purely on how they choose to pay their adviser. Colin Jelley, head of proposition marketing at Skandia, says forcing clients who choose to spread their payments over a period of time to suffer a financial penalty "flies in the face" of the aims of the RDR. The changes will become a major issue when the RDR is implem...