Exemption ― finance ― intermediaries

Produced by Tolley
Exemption ― finance ― intermediaries

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

  • Exemption ― finance ― intermediaries
  • What are intermediaries?
  • What is 'work preparatory to'?
  • Relevant case law
  • Services that are not VAT exempt intermediary services
  • VAT treatment of specific transactions
  • Financial derivatives
  • Soft commissions
  • Independent financial advisers (IFAs)
  • IFA networks
  • More...

This guidance note is intended to provide details on the VAT treatment of intermediary services provided in connection with the provision of financial services.

What are intermediaries?

It is very common for supplies of financial services to involve other businesses acting as intermediaries between the parties buying and selling the financial services. Other businesses may also be involved in the transaction providing specialist advice or assisting with ensuring that the transaction takes place. The supply of intermediary services connected with financial services are often exempt from VAT.

A supply of intermediary services consists of bringing together, with a view to the provision of financial services:

  1. persons who are or may be seeking to receive financial services

  2. persons who provide financial services

The performance of preparatory work before the conclusion of a financial services contract can be exempt from VAT. This does not include a supply of market research, product design, advertising, promotional or similar services unless it forms part of a composite supply of exempt intermediary services (see below).

In order for anintermediary service to be exempt from VAT, the party must be acting in the following capacity:

  1. must be acting as anintermediary in relation to anexempt financial services transaction

  2. must be providing anintermediary service in relation to the exempt financial services transaction

  3. if the financial services transaction falls within VATA 1994, Sch 9, Part II, Group 5, item 1, 2, 3 or 4, the intermediary must be undertaking work that is preparatory to the conclusion of a contract for the provisions of those financial services

Please note that it is not necessary for the contract to be concluded in order for the intermediary services to be exempt from VAT.

What is 'work preparatory to'?

If the intermediary services are connected with a supply of financial services falling within items 1–4, the intermediary must perform work that is preparatory to the conclusion of the contract for the provision of financial services. The intermediary may assist the potential

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