Exemption ― finance ― dealing in money, credit and debts

Produced by Tolley
Exemption ― finance ― dealing in money, credit and debts

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Exemption ― finance ― dealing in money, credit and debts
  • Financial services that are exempt from VAT
  • Financial services that are not exempt from VAT
  • Dealing in money
  • Transfer
  • Money
  • Coin dealing
  • Foreign exchange transactions
  • Cash machines (ATMs)
  • Current, savings and deposit accounts
  • More...

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 further assistance.

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, note that under VATA 1994, Sch 8, Group 11, Item 1, the issue by a bank of a note payable to the bearer on demand is zero-rated; see De Voil Indirect Tax Service V4.279.

The exemption does not cover:

  1. the supply of coins or banknotes as:

    These supplies are normally liable to VAT on the full selling price, whether or not they are sold for more than their face value. Examples include banknotes, proof coins, Maundy money and precious or base metal coins. However, it may be possible to use the second-hand goods margin scheme for supplies of collectors’ pieces (see the Overview of margin schemes guidance note for more information). Sales of some gold coins are exempt as investment gold; see the Exemption ― investment gold and gold coins guidance note for more information.

    1. collectors’ pieces

    2. investment articles

    3. items of numismatic interest

Financial services that are exempt from VAT

The following is a list of the main financial services that are exempt from VAT (a fuller explanation of the VAT rules is provided below):

  1. dealing in money (see below)

  2. securities (see the Exemption ― finance ― securities guidance note)

  3. instalment credit finance ― conditional sale, hire purchase and credit sales (see below)

  4. credit

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