Commentary

V4.136B Exemption for finance—loans, credit and related intermediary services

Part V4 Exemption, zero-rating and reduced rates

V4.136B Exemption for finance—loans, credit and related intermediary services

V4.136B Exemption for finance—loans, credit and related intermediary services

VATA 1994, Sch 9, Group 5, items 2, 2A and 5—scope of the exemption

Exemption is extended to1:

  1.  

    (1)     the making of any advance

  2.  

    (2)     the granting of any credit

  3.  

    (3)     the management of credit by the person granting it, and

  4.  

    (4)     the provision of intermediary services in relation to the above by a person acting in an intermediary capacity

Item 2 applies to advances or grants of credit which do not fall within item 3 (instalment credit finance) (see V4.136C). Thus it does not include the provision of finance under a hire purchase, conditional sale or credit sale agreement (for which see V4.136C). However, it does include 'the supply of credit by a person, in connection with a supply of goods or services by him, for which a separate charge is made and disclosed to the recipient of the supply of goods or services'2. Thus it is not always clear whether a supply of credit is exempt under item 2 or item 3 (unless the underlying supply is one of services, in which case item 3 is inapplicable, or unless the supplier of the credit is not making the underlying supply, in which case item 2 is inapplicable)3. However, the distinction (or lack of it) does not appear to have given rise to any significant difficulty.

Loans/granting of credit

There is no comprehensive list of the transactions falling under heads 1 and 2; HMRC lists the following examples4:

  1.  

    •     personal loans

  2.  

    •    

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