The move will take effect from 1 January.

It means that VAT will no longer be charged on the Smith & Williamson Managed Portfolio Service, the Tilney Managed Portfolio Service, Tilney Platform Model Portfolios and the Tilney Sustainable Managed Portfolio Service.

The decision to remove VAT follows industry discussions with HMRC about the requirement to add VAT to MPS products with HMRC indicating it is not required. Several firms have now removed VAT from MPS investment products including Brewin Dolphin and Investec.

Mickey Morrissey, head of distribution at Smith & Williamson Investment Management LLP, said: “Following discussions with HMRC, we are pleased to be removing the VAT charge from our Managed Portfolio Service with effect from 1 January 2021. This will be welcome news not only for financial advisers who invest in our service, but also, importantly, for end clients.”

Craig Wright, head of Tilney for Professionals, said the development would enable financial advisers to offer their core investment management services, including the firm’s recently launched sustainable MPS range without VAT being applied.

Tilney and Smith & Williamson recently merged to form one of the UK’s biggest wealth managers with £47bn in assets under management. 

Tilney’s MPS range covers the risk spectrum from defensive through to full equity risk. There are eight model portfolios in the MPS range and six in the Sustainable MPS range. Smith & Williamson MPS provides six core risk-rated models which are actively managed.