Exempt ― finance ― dealing in money, credit and debts

Due to the complex nature of financial services and the number of different types of transactions that are possible, the subject of exempt finance has been covered in a number of guidance notes. This guidance note provides an overview of the VAT treatment of financial services transactions involving dealing in money, credit and debts within the UK. If financial services are provided to customers located in other countries, then the Supplies of reverse charge services (general rule) guidance note may be of more relevance.

If a business makes any of the supplies listed below to customers belonging in the UK, the services will be exempt from VAT. As a result, the business will not charge VAT on the services provided but it cannot recover any VAT incurred in respect of the exempt supplies. Therefore, if a business makes only exempt supplies, it cannot register for UK VAT. Please see the Overview ― items that are exempt from VAT guidance note for a list of exempt supplies.

Under VATA 1994, Sch 9, Group 5, Item 1, the following supplies are exempt from VAT:

“The issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money”

However, please note that under VATA 1994, Sch 8, Group 11, Item 1, the following are zero-rated:

“The issue by a bank of a note payable to the bearer on demand”

The exemption does not cover preparatory services carried out separately before an exempt transaction concerning money, such as the preparation and delivery of data such as a wages roll, which is then put into effect by someone else. Preparatory services carried out by