The FSA has confirmed it is in talks with HM Treasury and HM Revenue & Customs (HMRC) about whether VAT will be charged on adviser fees.

A spokeswoman for the regulator said: "We are currently in discussions with the Treasury and HMRC about VAT. (We will be in touch with IFAs) once we get some kind of decision, I can't tell you what time frame that will be, but it will be before 2012."

Comment

This has long been a bone of contention for financial advisers and planners wishing to introduce a fee based charging structure (as the FSA would like). Clients paying by commission do not pay VAT, but clients paying fees do. The issue has come to the fore witj the FSA's announcement that commission is to be phased out, with advisers only able to charge at a rate agreed by the adviser and the client.

We would obviously like to see an outcome in which fees are VAT free, but think it is unlikely that the Treasury will forfeit any further income in the current economic climate.