Exempt finance ― intermediaries

By Tolley

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

  • Exempt finance ― intermediaries
  • What are intermediaries?
  • Relevant case law
  • Services that are not VAT exempt intermediary services
  • VAT treatment of specific transactions
  • Brokers
  • Corporate finance transactions
  • International transactions
  • Conclusion

This guidance note is intended to provide details on the VAT treatment ofintermediary services provided in connection with the provision offinancial services.

2006/112/EC , Article 135 (1); VATFIN7000; VAT Notice 701/49: finance ; VATA 1994, Sch 9, Group 5, item 5
What are intermediaries?

It is very common for supplies offinancial 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 ofintermediary services connected with financial services are often exempt from VAT.

A supply ofintermediary services consists ofbringing together, with a view to the provision offinancial services:

  • persons who are or may be seeking to receive financial services
  • persons who provide financial services

The performance ofpreparatory work before the conclusion ofa financial services contract can be exempt from VAT. However, exemption does not include a supply ofmarket research, product design, advertising, promotional or similar services (see below).

However, the collation or collection ofinformation will be exempt from VAT if the underlying financial service is exempt from VAT under VATA 1994, Sch 9, Part II, Group 5.

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

  • must be acting as an intermediary in relation to an exempt financial services transaction
  • must be providing an intermediary service in relation to the exempt financial services transaction
  • if the financial services transaction falls within VATA 1994, Sch 9, Part II, Group

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