Tax uncertainty threatens FSA share regime

Stockbrokers have warned that attempts by the
Financial Services Authority
to make the cost of trading shares more transparent could be scuppered by
tax uncertainty.

The FSA plans, which were introduced in January, were designed to separate
the costs of trading shares from equity research. Brokers, however, are unsure
whether payments for equity research from fund management should be subject to

Brokers are pushing HM Revenue
& Customs
for clarity on the issue, which could affect revenues
worth tens of millions of pounds, the FT reports. The main parties
affected will be independent research houses and research-led brokers.

The FSA reforms saw the creation of commission sharing agreements (CSAs),
which saw fund managers execute trades through a large investment bank and then
instruct the bank to pay some of the commissions to research houses which
produce useful research.

Share trade commissions are not subject to VAT, but after the creation of
CSAs there has been confusion over whether payments through CSAs should be
liable to VAT.

‘It is a bit of a mess. Somebody will end up taking it to a tribunal. Until
then, there won’t be any certainty,’ Stephen Coleclough, tax partner at

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