Exemption from VAT for dealing with money and operating bank accounts
Exemption from VAT for dealing with money and operating bank accounts

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Exemption from VAT for dealing with money and operating bank accounts
  • Why is the exemption for financial services important?
  • The financial services exemption from VAT
  • Dealing with money exemption
  • Practical application of the dealing with money exemption
  • The exemption for operating bank accounts
  • Practical application of the bank account operation exemption

Why is the exemption for financial services important?

VAT is a key concern for businesses in the financial sector as the supply of certain types of financial services to customers belonging in the UK are exempt from UK VAT. This is important because:

  1. businesses will not charge VAT on services falling within the exemption, and

  2. such businesses will not be able to recover input VAT on supplies they receive in the course of making an onward exempt supply

The financial services exemption from VAT

The UK VAT exemption for financial services is based on the relevant provisions of Council Directive 2006/112/EC (the VAT Directive). These have been enacted into UK law by Schedule 9, Pt II, group 5 to the Value Added Tax Act 1994 (VATA 1994) which sets out a number of items falling within the exemption.

This Practice Note focuses on the exemptions for services falling within the categories of ‘dealing with money’ (item 1 of Group 5) and ‘operating a bank account’ (item 8 of Group 5).

Dealing with money exemption

The issue, transfer or receipt of, or any dealing with:

  1. money

  2. any security in money, or

  3. any note or order for the payment of money

is exempt from VAT. This exemption is referred to as the 'dealing with money exemption' throughout this Practice Note.

The provision