Determining whether supplies are exempt, taxable or zero-rated, by Kevin Hall
The first step is to identify which services qualify for the financial services exemption and which follow the normal rules.
There is a formal list of the financial services which qualify for exemption in the legislation (VATA 1994 Sch 9 Group 5 reflecting art 135(1)(b)–(g) of the EC VAT Directive 2006/112/EC). HMRC’s interpretation of qualifying financial services is set out in Notice 701/49.
Rather than dryly listing the exempt supplies given in the legislation and HMRC’s interpretations this article will take the reader through common scenarios which show the basic principles in practice.
Example 1: Loans (and other supplies of credit)
A company lends money to customers. What are the VAT implications?
The supply of credit to a UK customer...
