Practical application of the exemption from VAT for dealing with securities
Practical application of the exemption from VAT for dealing with securities

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

  • Practical application of the exemption from VAT for dealing with securities
  • Why is the exemption for financial services important?
  • Dealing with securities exemption
  • Practical application of the exemption from VAT for dealing with securities
  • Financial derivatives
  • Stock lending
  • Trading on the London Stock Exchange (LSE)
  • Trading on London International Financial Futures and Options Exchange (LIFFE)
  • Electronic data services
  • Transferable cards that entitle the holder to discounts

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

Dealing with securities exemption

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

  1. any security, or

  2. secondary security

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

This Practice Note considers some examples of the dealing with securities exemption in practice. For more details on the specific definitions and requirements of this exemption, see Practice Note: Exemption from VAT for dealing with securities and underwriting.

The provision of intermediary services in relation to the above transactions by a person acting in an intermediary capacity are also exempt services. For further details, see Practice Note: Exemption from VAT for intermediary financial services.

Practical application of the exemption from VAT for dealing with securities

The dealing with securities exemption is significant in the financial markets and is particularly important when dealing in shares