Commentary

BB/18B/03 VAT—exemption of intermediary services provided in the finance sector

Part V16 Forms and other HMRC material

BB/18B/03 VAT—exemption of intermediary services provided in the finance sector

BB/18B/03 VAT—exemption of intermediary services provided in the finance sector

Business Brief, Issue 18. 30 September 2003

Following a Court of Appeal decision, this article explains Customs' revised policy on the VAT treatment of services provided by a body that introduces its members, supporters or customers to a credit card provider and undertakes work preparatory to the provision of the credit card.

In a joined Court of Appeal hearing concerning co-branded (affinity) credit card schemes, both British Airports Authority (BAA) and Institute of Directors (IoD) successfully argued that their services of introducing members, supporters or customers to two different banks for the purposes of issuing a credit card were exempt from VAT as the negotiation of credit.

As part of its introductory service, BAA targeted suitable applicants, issued applications, assisted in the completion of the forms, and screened and processed them when they were returned. In the case of IoD, the introductory service supplied included providing a list of suitable members, encouraging members to apply, assisting them with their applications, and validating completed forms.

Customs argued that neither BAA nor IoD were financial intermediaries because they did not provide services that directly affected the underlying credit transactions. Rather they were providing a taxable marketing and promotional service to the banks.

Legal decisions

BAA successfully challenged Customs' view in both the Tribunal and High Court. The IoD was defeated in the Tribunal. Both cases were heard jointly in the Court of Appeal.

In rejecting Customs' arguments,

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