Exemption from VAT for intermediary financial services

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

  • Exemption from VAT for intermediary financial services
  • Why is the exemption for financial services important?
  • The financial services exemption from VAT
  • The intermediary exemption for financial services
  • What are financial services?
  • What are 'intermediary services'?
  • What is acting in an intermediary capacity?
  • EU interpretation of the intermediary services exemption
  • Exclusions from the intermediary services exemption

Exemption from VAT for intermediary financial services

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for Tax?

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 Directive 2006/112/EC (the VAT Directive). These have been enacted into UK law by group 5 of Schedule 9, Part II to the Value Added Tax Act 1994 (VATA 1994), which sets out a number of items falling within the exemption.

This

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