The Financial Ombudsman Service (FOS) has found that a financial services provider failed to take into account its GST entitlement to reduced input tax credits (RITCs) on valuation fees charged to customers.
Thomson Reuters Weekly Tax Bulletin (Issue 4, 29 January 2016) reported that the issue was revealed as part of a FOS review of the provider’s general accounting practice and procedures relating to its entitlement to claim RITCs. This followed complaints by 2 customers that valuation fees charged to their accounts had not been correctly adjusted to reflect the provider’s RITC entitlements on the supply of such financial services.
Generally, financial services are input taxed. This means that a supplier of financial services is not liable to GST on the supply, but is not entitled to an input tax credit in respect of an acquisition used in the making of the input taxed supply. However, financial service providers are able to claim RITCs for certain acquisitions relating to the making of financial supplies.
The FOS considered that the failure to adjust the valuation fees for RITCs represented a “systemic issue”. The provider noted that 24 customer accounts had been impacted and undertook to ensure the valuations fees were correctly calculated in future. Nevertheless, the FOS has sought further information about whether the provider has reviewed other potentially affected accounts.