SIPP and wrap providers who do not currently pay VAT on fees for their services could find they are actually liable, warns Malcolm Small, policy director at the Tax Incentivised Savings Association (TISA).
Currently, some SIPP providers do not pay VAT because insurance mediation and investment management are exempt from the tax.
Some SIPP providers, as well as wraps and platforms, class themselves as providers of these services, rather than administrators.
However, TISA's Small warns providers may have judged their VAT liability incorrectly and is seeking further confirmation from HMRC over what constitutes insurance mediation and investment management.
TISA is putting together a committee to look into VAT liabilities.
"For years we have assumed if something is to do with pensions or insurance it is exempt," Small (pictured) says.
"Administration services are not exempt and could bring SIPP providers into VAT scope."
However, Martin Tilley, sales and marketing director at Dentons, says it is obvious which services should be subject to VAT and claims some providers knowingly avoid paying it.
"If you are providing a service in the UK the fees for it will be subject to VAT," he says.
"Most bespoke SIPP providers pay VAT and charge VAT on their fees.
"Those that do not are either some form of hybrid insurance contract and so are a product, or have set up an offshore arrangement to spit in the face of HMRC."
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