BB/10/03 VAT—changes to finance exemptions

Part V16 Forms and other HMRC material

BB/10/03 VAT—changes to finance exemptions

BB/10/03 VAT—changes to finance exemptions

Business Brief, Issue 10. 25 July 2003

This Business Brief explains changes being made to the finance exemptions. The changes follow Customs defeat in the Court of Appeal decision in the case of First Data Resources (FDR), a case concerning credit management, and the tribunal decisions in the cases of Prudential Assurance Co Ltd and Abbey National PLC, concerning the VAT liability of sub-contracted investment management.

It updates Business Briefs 10/00 and 10/01 in respect of credit management and cancels the first items of Business Brief 06/01 in respect of sub-contracted investment management provided to an authorised unit trust.

The new legislation applies to supplies made on or after 1 August 2003. However, taxpayers have had the benefit of the decisions since the dates of the judgments, which were 13 July 2000 for FDR, 16 January 2001 for Prudential and 19 December 2001 for Abbey National.


FDR provides data processing and management services to banks in respect of their credit card operations. The services include the production and issue of plastic cards, transaction authorisation, anti-fraud procedures, transaction processing, debt settlement and the preparation and issue of customer and merchant statements. They have been described as “clearing house” services for card transactions.

Whilst some of FDR's services would be taxable if supplied on their own, the Court of Appeal ruled that the core service was the making of transfers of money and therefore the overall supply was exempt from VAT.

Under the existing legislation supplies of this nature would have been taxed

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