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Is VAT chargeable?

I have client who used to work in the City as a stockbroker, until he resigned recently. Over the years he has built up a number of business contacts and whilst having lunch one day with one of these contacts he was asked he if he knew anyone/company who would be interested in investing in his company. My client used his contacts and the eventually a deal was done for which my client received a 7 figure sum.

If it was purely an introduction I believe it would be Vatable, however my client has said he was more involved than that and provided advice, valuation and timing advice.

Therefore is this exempt from VAT as his services are I connection with the provision of financial/ancillary services??

Many thanks 

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05th Apr 2012 16:22

I do hope . . .

I do hope your client was authorised under the Financial Services & Markets Act 2000 to do investment business and he has sufficient professional indemnity insurance cover for the amounts involved!

As far as VAT is concerned check out paras 9.1 and 9.7 HERE.

David

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05th Apr 2012 16:57

!

davidwinch wrote:

I do hope your client was authorised under the Financial Services & Markets Act 2000 to do investment business and he has sufficient professional indemnity insurance cover for the amounts involved!

That was as far as my brain would think before it shut down in (potential) horror!

 

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avatar
06th Apr 2012 17:03

VAT

Please follow the case of Alex Hope who is suspected of acting without proper authorisation.

If you are advising clients I trust you have followed all the correct procedures and are regulated to hold information, properly insured, etc 

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By Hansa
06th Apr 2012 23:59

VAT & FSMA

1. VAT - On the face of it, this probably is VAT exempt

2. FSMA - Again, on the face of it, your client is almost certainly required to be "authorised" and, being a stockbroker, the FSA is likely to show little mercy if they catch up with him. ("He knew or should have known ... etc") In any event most FSMA offences are strict liability meaning no mens rea need be shown - simply, conviction is on the facts not on intent. 

If the bill has not yet been rendered, there may be a way (or ways) to remedy the situation and I've sent you a PM to briefly suggest what might be done.  

I think your client should put his fee on hold (if still possible) until he has ascertained his options.

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07th Apr 2012 13:46

A relevant question is whether, as a result of the deal, the new investor now has a controlling interest in the company?

If the new investor has a controlling interest (which normally means 50% or more of the voting shares) then your client may NOT need to be authorised under FSMA 2000, see Article 70(1), (2) & (6)  HERE.  (The logic to this is that the FSMA 2000 is about protecting people making investments - not about protecting people buying businesses.)

If the new investor does not have a controlling interest then authorisation would appear to be necessary as the advice falls within Article 53 HERE.

The law in this area is complex.  You may wish to advise your client to obtain his own legal advice if he is not authorised under FSMA 2000.  If he is on the wrong side of the law here he could find the entire fee is taken off him!

David

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