My client runs his business through a limited company and the nature of the business is financial services. In recent years business has focussed purely on advising on, and arranging mortgages for individuals. The company has a direct FSA registration.
90% of this client's income is commission earned for mortgage procurement and it is accepted that this is an exempt supply. However, if it is unlikey that the commission will cover the costs involved with undertaking the work my client may charge an 'application fee' to cover the administrative costs of dealing with the mortgage application. This is invoiced to the customer.
Are such fees exempt or standard rated? Currently application fees are below the VAT threshold, but ........
Any thoughts would be most appreciated.
Stormrider
Replies (2)
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Doesn't change
The liability of the supply is not dependent upon the person to whom it is invoiced. If the charge is for the services of acting as an intermediary in a supply of credit then it is exempt.
As with the commission received, the IFA must do more than simply introduce the 2 parties. The supply must include "work preparatory to the conclusion of a contract" to qualify for exemption.
Regards,
Paul Taylor
Senior VAT Consultant
Dains