HMRC consults on applying VAT charge to research payments under MiFID II

Asset managers could further reduce research budgets

Research payments could be hit with a full 20% VAT charge after MiFID II comes into force next year, as Her Majesty's Revenue and Customs (HMRC) considers the tax implications of separating the payments from usually tax-exempt trade execution services.

HMRC has been meeting with industry groups to discuss the tax issues and is set to publish guidance on value added tax to research payments soon, according to Bloomberg. MiFID II countdown: What can be achieved with only 100 days to go? Under MiFID II legislation, which comes into force on 3 January 2018, asset managers must pay brokerages for stock and bond research rather than including the service within trade execution, which tends to make it tax exempt. As a result, research payments could be charged the full 20% VAT fee, with little clarity so far on the circumstances where p...