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Confusion Remains: VAT Exemption Rules for Financial Services in the UK

  • Many financial services are exempt from VAT, including management of certain regulated funds
  • Financial services not exempt are subject to 20% VAT, often borne by investor
  • Investment research used by asset managers is subject to VAT
  • Research service paid with exempt execution service has no VAT on research element
  • Updated EU Mifid II brought VAT liability of investment research under spotlight
  • FCA rules prevent UK asset managers from purchasing research with bundled payments
  • HMRC updated guidance on VAT treatment of research services
  • FCA’s proposals do not clarify VAT position
  • Consultation on payment optionality for investment research launched by FCA
  • IRR panel recommended additional optionality for paying for investment research
  • FCA acknowledges complexity of research payment account
  • Proposed additional payment option to enable firms to use joint payments for research


Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.


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VAT news