|HMRC Reference:Notice 701/49 (January 2013)||View Change History|
This notice cancels and replaces Notice 701/49 Finance (November 2011). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
This notice explains the VAT liability of certain financial services in the United Kingdom (UK). You will find this notice useful in determining whether:
The content of this notice assumes that you have knowledge of the principles of VAT explained in Notice 700 The VAT Guide and have read Notice 700/15 The ins and outs of VAT.
Commodity derivatives and terminal markets are covered in Notice 701/9 Commodities and terminal markets. Gold and investment gold coins are covered in Notices 701/21 Gold and 701/21A Investment gold coins.
This notice cancels and replaces Notice 701/49 Finance (November 2011). The notice has been updated to reflect changes in Section 5 ' Debts and related services'.
Financial services have relevance to every business and are not confined to banks, building societies, other financial institutions or financial intermediaries. If you are a business and you supply or receive financial services this notice will be relevant to you.
You can access details of any changes to this notice since June 2009 either on our website at .hmrc.gov.uk, or by phoning our Helpline on 0300 200 3700.
This notice and others mentioned are available both on paper and our website.
UK law is contained in the Value Added Tax Act 1994, which is referred to in this notice as the VAT Act. Relevant extracts from the VAT Act can be found in section 10.
In general, financial services are exempt from VAT. However, the following list contains examples of services that, although connected to financial services, are not themselves exempt:
Where these services merely form one element of the service being provided, it will be necessary to look at the whole service being provided in order to determine the correct supply position and the liability of that supply or those supplies. Paragraph 1.7 below looks at the question of single supply or multiple supplies.
Certain financial services, such as the provision of intermediary and sub-contracted (‘outsourced’ – see paragraph 1.8) services, can constitute a number of component services that, if supplied separately, may have different VAT liabilities. In order to establish the correct liability of such packaged services you may need to apply certain tests to ascertain the overall liability of your supply. You can find further information in the VAT Supply and Consideration manual (VATSC80000) or by contacting our Helpline.
If you provide sub-contracted (or ‘outsourced’) services to a supplier of exempt financial services, such as a bank, the liability of your supply depends on the nature of the service you perform. It does not become exempt simply because your customer uses your service in making its own exempt supplies.
You must determine the exact nature of your supply. For it to be exempt, it must, when viewed broadly, form a distinct whole, fulfilling the essential functions of a supply described within the finance exemption set out in the VAT Act, Schedule 9, Group 5 (see paragraph 10.5).
If you are acting as an intermediary you should read section 9 of this notice.
If you are providing outsourced services to a loan provider you should read paragraph 4.11 of this notice.
You are entitled to deduct the input tax incurred that you use or intend to use in making taxable supplies. You cannot normally deduct input tax where this relates to exempt supplies (although special rules apply to supplies of financial services made to persons located outside the EU – see paragraphs 1.10 and 9.13, and section 8 of Public Notice 706 Partial exemption). If your input tax relates to both taxable and exempt supplies, you can normally deduct only the amount of input tax that relates to your taxable supplies. You can find further information in Notice 706 Partial exemption.
If you purchase capital items for business use you may need to make adjustments of input tax in subsequent years. Capital items are assets that are capable of being used in your business over a period of years. The items concerned for which adjustments may be necessary include computer equipment, land, buildings and refurbishments. You can find further information on this in Notice 706/2 Capital Goods Scheme.
If you make financial services to or receive them from people who belong outside the UK you should read Notice 741 and 741A Place of Supply of Services. It explains when you can treat services that are supplied to a person belonging outside the UK as outside the scope of VAT. It also explains how you should account for VAT on the receipt of certain financial services from outside the UK (reverse charge).
You should note that not all the finance related services mentioned in Notice 741 Place of Supply of Services are exempt from VAT when supplied within the UK (see paragraph 1.6).
References to money in this notice include currency, bank notes and coins, in sterling or any other currency used as legal tender in a financial transaction, but not, with effect from 1 July 2006, platinum nobles.
Securities for money are dealt with in section 3.
Dealing with money includes financial transactions of a kind routinely, but not necessarily, carried out by banks, building societies, bureaux de change and similar institutions. To be dealing with money you must be carrying out a financial transaction. Financial transactions that involve dealing with money include:
This list is not exhaustive.
When supplied on their own the following are taxable:
This is because the services being applied to the money are the same as those that could be applied to any type of goods that can be counted, packed, delivered, collected and reconciled.
Services that include an element of making payments or transfers between bank accounts are exempt. Where a supply has a mixture of taxable and exempt elements, its overall character will determine the liability.
The first issue, by the bank of issue, of Bank of England, Scottish and Northern Irish banknotes is zero-rated. This provision overrides the exemption allowed for dealings with legal tender banknotes.
Preparatory services that are carried out separately, before an exempt financial transaction concerning money, are taxable. An example is the preparation and delivery of data such as a wages roll, which is then put into effect by someone else.
Preparatory services carried out by an intermediary as part of their overall exempt supply are exempt (see paragraph 9.3).
If you accept over-the-counter payments for household bills and charge for the service, your supply is exempt.
If you sell bank notes or coins, whether or not they are legal tender, as:
your supply is normally taxable on the full selling price, whether or not they are sold for more than their face value. Examples include:
However, if you make supplies of collectors' items of numismatic interest, you may be able to use the special scheme explained in Notice 718 Margin Scheme for second-hand goods, works of art, antiques and collectors' items. Sales in some gold coins are exempt as investment gold. Further information is provided in Notices 701/21 Gold and 701/21A Investment gold coins.
Foreign exchange transactions are normally exempt supplies. If you act as principal, then the consideration is the net result of your transactions over a given period of time plus any fees or commission charged. However circumstances may arise where you enter into a foreign exchange contract that does not provide for a consideration in any form. In this instance there may not be a supply for VAT purposes. For further information please see Business Brief 21/05.
If you act as an intermediary in a foreign exchange transaction you should refer to section 9.
A service supplied by a clearing-house for settling indebtedness between members is an exempt supply.
The provision of an ATM and software
Supplies of an ATM itself or the software required to run it are both taxable, whether or not the consideration is based on the ATM's use.
Services provided in connection with the routine operation of an ATM, including filling with cash, maintenance and repair, are taxable supplies.
Convenience, interchange and reciprocity fees
ATM providers sometimes make charges that are described as convenience fees, interchange fees or reciprocity fees. Where the charge is for:
the supply is exempt.
The granting of a right to permanently attach an ATM to the ground, or for its incorporation into the fabric of a building, is an exempt supply unless the grantor has elected to waive exemption. Further guidance can be found at section 2 of Notice 742 Land and property.
Many of the charges made by banks, building societies or similar organisations in connection with the operation of a current, deposit or savings account will be exempt. Exceptions include charges made for:
Please note that the above list is not exhaustive.
As either a bank or a supplier of goods or services, you may charge your customers, because:
If you are a bank making such a charge to your customer, the charge will be a part of your overall service for running the customer’s account and will be exempt from VAT.
If you are a supplier making such a charge to your customer, the charge will be outside the scope of VAT.
Electronic banking services (including account management) are supplied by banks to customers (both businesses and individuals), as an addition or alternative to conventional banking services. In the case of business customers, the business uses computer equipment, sometimes leased or purchased from the bank, to obtain services which would otherwise have been provided by the bank in the course of its operation of the business's account (such as statements of the business's current balance or transfers of funds between accounts), as well as more general finance related services (such as information about share prices or foreign exchange rates).
To determine the liability of an electronic banking service it should first be established whether it is provided as a supply in its own right or as part of a package of services (see paragraph 1.7). In principle, services which would have been treated as exempt under the VAT Act, Schedule 9, Group 5 if they had been provided by the bank by conventional means should be treated as exempt when provided within the framework of electronic banking services; other finance related services which are not covered by Group 5 should be treated as liable to VAT at the standard rate.
Where charges are made for the supplies detailed below they should be treated as follows:
Provision of information on share prices, foreign exchange rates, balances on accounts with other financial institutions.
Provision of information on the state of the client's accounts by the bank providing the electronic banking services, bank statements, the transfer of funds and the debiting and crediting of accounts.
Hire of equipment and related charges, such as training, if supplied and shown as a separate item on the invoice.
Hire of equipment and related charges, such as training, if not shown as a separate item on the invoice.
Hire of equipment which can be used for other purposes (e.g. where the link gives access to Bloomburg etc.).
Sale of equipment.
Service charges/overall service charges
If, as an employer, you charge for deductions from the pay of your employees for items such as:
your supply is exempt.
If you charge for the deduction from the pay of an employee in compliance with an attachment of earnings order, this is seen as reimbursement for expenses incurred in carrying out a statutory duty and is outside the scope of VAT.
A security for money can be described as a document under seal or under hand for consideration containing a covenant, promise or undertaking to pay a sum of money. Securities for money are not restricted to a specific type of document: examples include bills of exchange, financial guarantees and promissory notes.
The issue of a security for money is exempt.
If you deal with securities for money as an intermediary or broker you should read section 9.
Face value vouchers that give a right to goods or services are not seen as securities for money. However, if the voucher is issued on credit and the presentation/redemption of the voucher establishes the issuer's obligation to pay the face value voucher then at the point the voucher can be exchanged for money it is a security for money and any consideration for it is exempt. For example, where the voucher is presented to a retailer as payment for goods or services it is not a security for money, but when the retailer presents the voucher to a third party to be exchanged for money, it becomes a security for money at that point if the voucher had been issued to the redeemer under a credit arrangement/initial grant of credit. You can find further information on face value vouchers in VAT Information Sheets 03/2003 and 12/2003 and Notice 700/7 Business promotion schemes.
The VAT liability of these types of products depends on the precise nature of the arrangements in place. In order to qualify for exemption, they must be financial instruments that are securities for money as defined in paragraph 3.1. This means that an exempt guarantee or surety will involve a third party providing a guarantee or security for payments to be made under a contract. Exemption does not extend to ‘performance guarantees’ whereby a third party performs a service or makes payment if a contractual party fails to fulfil their obligations (to perform a service or supply/repair goods) under a contract.
The finance exemption will not apply to the supply of warranties or contracts for the supply, repair or maintenance of goods even though these are sometimes referred to as guarantees. However, you should also read Notice 701/36 Insurance.
The issue or encashment of travellers' cheques is exempt. Un-issued or unsigned travellers' cheques are neither securities for money nor notes for the payment of money, and their supply to or importation by the issuing bank is taxable on their value as stationery.
If in the course of your business for a consideration you
your supply is exempt. The charge you make for a loan, advance or credit facility is usually described as interest. The value of the exempt supply in the grant of credit or loan is the gross interest or other sum received, but not the repayment of capital loaned.
Interest received on money deposited is consideration for an exempt supply.
This type of credit is usually advanced in connection with the supply of goods, and may be under a hire purchase, conditional sale or credit sale agreement (see paragraph 4.3). The provision of instalment credit in these situations is exempt where a separate charge is made for the facility of instalment credit and disclosed to your customer.
If this condition is satisfied, the supply of credit is exempt and the supply of goods taxable, the value being the cash price stated in the agreement before any deposit or any part exchange value is deducted. If you do not satisfy this condition, the full amount paid by the customer is consideration for the supply of goods.
The full amount of VAT on the goods is accounted for at the time of supply. Usually this is when the goods are delivered, but it may be preceded by any part payment, or the issue of an invoice.
Conditional sale means the sale of goods where the price is payable by instalments. The goods remain the property of the seller until the full price is paid and/or the customer meets another agreed condition.
Hire purchase occurs under an agreement for the hire of goods for periodic payments, where the hirer has the option to purchase.
Credit sale means the sale of goods which immediately become the property of the customer, but the price is payable in instalments.
What if the instalment credit I provide does not involve a finance company?
If you are a supplier of goods and are financing the credit yourself, your supply of credit will be exempt if the charge is disclosed separately to your customer. Your supply of goods must be under a conditional sale, hire purchase, or credit sale agreement (see paragraph 4.3). The consideration for the taxable supply of the goods is the price stated in the agreement.
What if a third party finances the instalment credit?
If a third party finances your supply of instalment credit, for example hire purchase or conditional sale, your supply of goods is to the finance company, which takes title to the goods, and not to your customer who is allowed to use the goods. Thus your supply is one of goods and not one of financial services. The third party supplies the financial services and the goods, to the user/customer.
What if the instalment credit I provide is interest free?
If by arrangement between yourself and your customer you supply goods or services and your customer pays for these goods or services over a set period without paying interest, there is no supply of credit for VAT purposes (see paragraph 4.5).
What if the instalment credit is interest free and provided by a third party?
When you supply goods to customers on interest free credit terms, you may receive an amount from a finance company, which is less than the amount due from your customer for the goods. This does not affect the value of the supply to the customer and you must still account for VAT on the full sales price invoiced to your customer for the goods. The difference between the full selling price, and the amount you receive is consideration for an exempt supply by the finance house to you, the supplier.
Are my supplies of services relating to instalment credit finance exempt?
Exemption normally applies to any supplies connected to credit charges unless the charge relates, wholly or partially, to the supply of goods.
Fees, such as for administration, documentation, or transfer of title, fall within the above exemption when they are ancillary to the principal supply of credit.
How do I account for VAT on commission received from finance companies?
You may receive commission for introducing your customers to finance houses that provide them with credit. This supply is exempt if you are acting as an intermediary (see section 9).
What if the finance agreement does not run its full course and the goods are returned or repossessed?
Where goods are delivered under finance agreements on or after 1 September 2006 the following treatment should be applied. For goods delivered prior to this date the guidance in VAT Information Sheet 05/04 should be followed.
(a) Reduction in VAT charged on first sale
Where goods are supplied under hire-purchase or conditional sale agreements title does not pass in the goods until all payments under the agreement have been made. If an agreement ends early, and the agreement includes terms that result in the customer becoming liable to pay nothing more on returning or repossession of the goods, or liable to a lesser amount (for example the proceeds realised by the re-sale of the goods) this will result in an adjustment of the VAT accounted for at the outset of the agreement.
Where the reduction in price contains elements of capital and interest any reasonable method for apportioning the value of the reduction may be used. The method of allocation should be consistent and reflect the accounting methods used within the business.
There may be circumstances where no VAT was accounted for on the sale of the goods – such as the sale of certain second hand goods where no margin is achieved. If no VAT was originally accounted for there is no adjustment (of the VAT).
This treatment does not apply to goods sold under a credit sale agreement. Here title passes at the outset of the agreement and the return of the goods is treated as a supply from the customer to the finance company. Therefore the value of the original sale is not affected by the return.
If you are entitled to reduce the VAT you originally accounted for and your customer is VAT registered you must send them a document effecting the adjustment, to ensure that your customer makes a corresponding adjustment to any input tax they may have claimed.
Where goods are repossessed (following default by a customer), you may be entitled to claim bad debt relief on any amount outstanding following the adjustment. Notice 700/18 Relief from VAT on bad debts contains detailed guidance on the relief.
(b) Treatment of re-sale of returned or repossessed goods
When the returned or repossessed goods are sold for a second time they will be subject to VAT unless they are specifically treated as neither a supply of goods nor services. The most common example is likely to be the second sale of margin scheme goods where no VAT was accounted for on the first sale; providing they are sold in the same condition, no VAT was recoverable by the first customer and the second sale price does not exceed the purchase price paid for the goods.
The provision of the following to your customers are not supplies of exempt credit:
You may allow customers to defer payment but make an extra charge for allowing them to do so. If the charge relates to periods before and up to the time of the supply (see Notice 700 The VAT Guide) it is not a charge for credit, but is further consideration for the supply of the goods or services. Alternatively where you agree to defer payment beyond the time of supply and make an additional charge for doing so, such a charge will be consideration for an exempt supply of credit.
Credit, debit and charge cards include MasterCard, Visa, American Express, Diner's Club, Connect and Switch. Banks and financial services institutions issue these cards under the umbrella of these organisations. In addition, certain companies provide in-house card schemes for retailers or retail outlets.
If you are a retailer:
With credit cards and other forms of payment cards the cardholder can either pay their outstanding balance on the receipt of their statement or pay on an instalment basis, interest being charged on the outstanding amount. The following charges are consideration for exempt or taxable supplies:
Where a third party endorses a credit card and recommends its use to its members, supporters or customers, the organisation endorsing the credit card may receive commission or similar income from the credit card provider. Whether this income is exempt from VAT will depend on the nature of the service supplied to the credit card provider.
If you are introducing your members, supporters or customers to a credit card provider and you bring the two parties together, carrying out independent negotiation services as a distinct act of mediation, then you are providing exempt intermediary services (see section 9).
The following are always standard rated:
Special rules apply to charities and you can find further information about this in Notice 701/1 Charities.
If you provide credit management, and you do not grant the credit, your supply is taxable. If, on the other hand, you grant the credit and also manage that credit, your supply will be exempt.
A supply by a third party of taxable credit management could typically include the following features:
The above list is not exhaustive.
If as a business you provide a package of outsourced service to a loan provider that consists of services prior to and after the granting of a loan, your supply to the loan provider is exempt if you provide all of the following services as a central part of that supply:
It is possible that your supply will be exempt where you provide one or more of the above services in addition to other taxable services (such as those detailed in paragraph 4.10) but this will depend on the nature of the whole service being provided (see paragraph 1.7).
The unencumbered sale of debt for a consideration is exempt. The value of the supply is the gross amount that the purchaser pays for the debt.
Factoring, including invoice discounting, is essentially a form of debt collection and is a taxable supply. However, factors and invoice discounters offer a number of services to their clients and these usually include the prepayment of part of the value of the debt. Consideration attributable to the latter is in respect of an exempt supply of credit.
The client assigns his debts to the factor but this is not a supply for VAT purposes. This assignment is of an equitable interest that enables the factor to fulfil his contracted functions. The factor opens a client account to which he credits the face value of the debts he has been assigned and debits his charges. These charges may be consideration for a number of standard rated administrative, clerical and accounting services. The balance, less an agreed retention, is available for the client to draw upon. To the extent to which he does so the factor debits a further charge, often described as ‘discount’. This is consideration for the exempt supply of credit.
The factor may operate on a recourse or non-recourse basis.
In a recourse agreement the factor will put the responsibility for bearing any loss on the client. If the debtor defaults the factor will re-assign the debt to the client.
In a non-recourse agreement the factor will accept the risk of default. A charge for this service is standard rated although it will usually be reflected within an enhancement to the administration, factoring or service charge.
Assignment or re-assignment of debt.
Discount or interest charge.
Administration or service charge (this may cover the provision of a full sales ledger management service, credit advice, debt collection service and the provision of management information).
Guarantee of payment.
Electronic transfer of funds (if charged for separately).
The factor will make both taxable and exempt supplies and will therefore be partly exempt. Where he provides significant administrative or accounting services to the client his standard rated supplies will allow him a high input tax recovery. Where, as in invoice discounting, the credit facility is the predominant feature of the agreement his input tax recovery will be lower.
For further information concerning partial exemption please see Notice 706 Partial exemption.
A factor cannot claim bad debt relief for debts assigned to him by his client. The client cannot claim bad debt relief for a debt assigned to a factor but can do so if the factor re-assigns the debt to him (see Notice 700/18 Relief from VAT on bad debts).
Please see Notice 731 Cash Accounting for details on how to treat the debt for cash accounting purposes.
You are providing exempt debt negotiation services if you bring together the credit provider with the debtor and act between them in an attempt to mediate a change to the payment terms. However, please also read paragraphs 5.10 and 5.11.
For more information on intermediary services read section 9.
The supplies made by a debt collection agency, or by someone involved in debt collection, are taxable. Debt collection covers the collection of debts of any nature, even if payment of those debts has been received before, on, or after their due date.
Although debt collection service undertaken on behalf of a creditor company may involve some negotiation of the repayment of a debt by the debtor to the creditor this will not be an exempt debt negotiation service. For example if you:
these services will be taxable. Any debt negotiation services will be ancillary to the principal service of debt collection.
The above list is not exhaustive.
The supplies made by an Insolvency Practitioner are normally taxable
Where an Insolvency Practitioner acts as both nominee and supervisor in any type of formal Voluntary Arrangement then the supplies by the Insolvency Practitioner are exempt
Further details on Insolvency Practitioner services can be found in the VAT Finance manual (VATFIN3260).
The issue of securities such as shares, bonds, loan notes, debentures etc., are not supplies for VAT purposes when the purpose of that issue is to raise capital. This includes the issue of units or shares in an investment fund.
Input tax incurred that relates to an issue of shares or other securities will be recoverable to the extent that the issuer’s business activities generate taxable supplies.
Business Briefs 12/05 and 21/05 provide further details on this. For further guidance on input tax recovery please read Notice 706 Partial exemption.
Transactions in securities that are already in existence are exempt when they are sold or transferred in the course of a business activity and the normal partial exemption rules apply.
If you are an intermediary in a transaction concerning shares etc., please read paragraph 9.4.
This list is not exhaustive.
For the liability of corporate finance services please see paragraph 9.7.
Stock lending describes a situation where one person, the ‘lender’, transfers to a second person, the ‘borrower’, the legal title, along with all the dividends and rights, to securities. The borrower agrees to return to the lender, at a later date, an equivalent number of the same securities as those received.
Stock lending is an exempt supply, the consideration being the fee charged to the borrower.
Where stocks are loaned, the borrower who holds legal title receives dividends, which are not consideration for a supply.
The borrower should not account for the value of securities returned to the lender.
A share underwriter guarantees to buy a proportion of any unsold shares when a new issue is offered to the general public, and usually receives either commission or charges a fee. A share underwriter may also underwrite an issue by agreeing to guarantee that buyers will be found. In either case the supply is exempt.
There is not a supply for VAT purposes by the issuer who sells the securities to the underwriter (see paragraph 6.1), but there is a subsequent exempt supply by the underwriter when those securities are sold.
If, as an underwriter, the commission or fee received for your services is adjusted to reflect the entitlement to purchase your allotted securities at a special price, the value of the adjustment (or ‘discount’) must be regarded as part of the consideration for your exempt supply of underwriting services. However as an underwriter you may be obliged to buy further securities that remain unsold. The underwriting agreement may allow you to buy these unsold securities at a price lower than the offer price. This reduction is not regarded as consideration for the underwriting service and you, as the underwriter, should treat it as outside the scope of UK VAT.
Exemption also applies to supplies made by a sub-underwriter who agrees to underwrite a proportion of the sale, whether the sub-underwriter's services are supplied to the underwriter or to the issuer.
You are a nominee if you hold securities in your own name on behalf of a third party (the beneficial owner). Your services of acting as nominee are exempt. This includes charges for transferring stock from one nominee to another which is seen as an exempt transaction in securities.
There are two types of custody services, safe custody and global custody.
Safe custody services are taxable. These services include the provision of the purely physical service of safekeeping, sometimes referred to as safe deposit facilities. A supply of safe custody services is taxable if you, as a business in the UK, contract to supply the service to your client irrespective of whether the securities are held in the UK, an overseas branch of your business or elsewhere.
If you lease or hire a specific site to your client rather than provide a service of secure storage within your premises, the supply is in the UK if the site is in the UK, but outside the scope of UK VAT if the site is overseas. You may have to account for VAT in another Member State if the place of supply is elsewhere in the EU.
Global custody services are a package of services that may include safe custody, the collection of dividends or interest on securities held, dealing with scrip and rights issues and payment against delivery of stock. This package of services including the safe custody element is exempt.
Services of a share registrar may include some or all of the following:
This list is not exhaustive.
The liability of a share registrar service is taxable at the standard rate of VAT.
Where the share registration service is provided as one element of a single composite supply featuring other services with a different VAT liability the liability may change (see paragraph 1.7). Where the share registration service is provided to either an authorised unit trust or open-ended investment company please see paragraph 7.5.
The services of a share registrar are supplied where the recipient belongs when supplied to a business customer, this follows changes to the place of supply rules introduced on 1 January 2010. Notice 741and 741A Place of supply of services provides further information.
Fees charged by regulatory bodies, such as the Financial Services Authority, for listing companies that wish to float on an exchange are outside the scope of VAT.
Many exchanges charge fees to their members for admission to the exchange, as well as market maker charges, transaction charges and exchange charges.
Basic admission or membership charges are taxable at the standard rate, with the place of supply being where the recipient belongs following changes to the place of supply rules introduces on 1 January 2010.
The liability of other charges depends on exactly what is being done by the exchange for the charge. If the service is not an intermediary service (see section 9) then the fee will be taxable at the standard rate.
If you arrange the issue or placements of securities, whether as offers for sale, rights issues, cash offers, vendor placings or bids with underwritten cash alternatives, including the service of co-ordinating an issue when a number of participants are involved in the share or other placings, your service is exempt.
The provision of advice is taxable (see paragraph 6.14).
If you supply execution only services, for example, buying or selling securities on your client's instructions, but do not offer advice on securities, your supply is exempt. (If you purely provide advice see paragraph 6.14.)
If you provide advice and this advice is incidental to transactions in securities then your supply will be exempt. For single supply or multiple supply questions see paragraph 1.7.
If you arrange a securities transaction, you may split the contract note to show as separate items the basic charge for your execution service and any compliance and regulatory charges which you make to cover the cost of meeting regulatory requirements. These additional charges are part of the consideration for your exempt supply. This rule does not apply to any statutory levies such as stamp duty that are a liability of your client. These are outside the scope of VAT and need not be accounted for as part of your exempt supplies.
Many transactions in securities are effected by electronic means. If you operate a dealing system that allows a user to insert a bid and offer quotes for securities, another user to insert an acceptance and for the system to match and sell deals, your supply of the dealing system is exempt, but only where you run that system. However, if you supply data services please see paragraph 6.13.
your service will be taxable.
In most cases, the exemption for intermediary services (see section 9) does not cover:
Services supplied in connection with share issues, acquisitions or disposals that do not bring together the buyer and seller are also taxable. This includes such supplies as:
This list is not exhaustive.
If one or more of the above services are provided as part of a complete service that would include an exempt financial service you should see paragraph 1.7.
Where the service is provided to a Collective Investment Undertaking (CIU) please see paragraph 7.5.
If you have clients based outside the UK, you will need to determine where your supply is made for VAT purposes. The place of supply affects both the VAT liability of a service, and whether you can recover input VAT relating to that service. You can find detailed guidance on place of supply in Notice 741 and 741A Place of supply of services. If you cannot establish the identity of the purchaser of securities refer to paragraph 6.16.
If you belong in the UK and supply financial services to a:
your supply is within the scope of VAT and subject to UK rules on liability, invoicing, accounting and partial exemption.
If you supply services to someone who belongs in:
your supply is outside the scope of UK VAT. You may also be able to recover input tax on your supply in some circumstances. Paragraphs 1.9 and 9.11 give further guidance on this.
(a) Where the place of transaction, that is the relevant security exchange, is known then a sale transacted:
(b) Where the place of the transaction is not known, then the place of supply is deemed to be a place where the security is listed.
(c) Where the place of transaction is not known and the security is not listed or is listed on both a EU and non-EU exchange, then the place of supply is deemed to be the place where the last known broker in the transaction ‘belongs’
Article 135(1)(g) of the Principal VAT Directive exempts ‘the management of special investment funds as defined by Member States’.
Until 30 September 2008, UK law (Items 9 and 10, Group 5, Schedule 9 to the VAT Act 1994) defined the following funds for the purposes of the exemption:
From 1 October 2008, following a European Court ruling (‘Claverhouse’) the exemption has been extended so that there is a level VAT playing field for all similar collective investment undertakings which compete in the UK retail market (that is, for investment by the general public) under comparable conditions. This includes closed/open-ended collective investment undertakings which meet the revised definitions regardless of where they are established. TBS are no longer included in the exemption.
CIU are in the business of collective investment that is they pool and invest capital raised from the public and do so for a fee or ‘management charge’. It is this management charge that is the subject of the VAT exemption. CIU may be constituted in various legal forms, but common to all of these is that investors hold shares or units in the CIU.
Item 9 and the Notes to Group 5 (amended from 1 October 2008) set out the open-ended funds to which the exemption applies. In summary these are collective investment schemes which are:
Recognised overseas schemes are CIU which have been notified to, or authorised by, the FSA as appropriately regulated for the UK retail market. Many larger overseas CIU are ‘umbrellas’ whereby the assets are separated into distinct ‘sub-funds’. It is important to note that, for the purposes of the legislation, each sub-fund of an umbrella is defined separately. For these overseas funds, the aim of the law is to capture only those sub-funds in which units are, or have been, actively marketed to UK retail investors and so the FSA register is not necessarily definitive in identifying them.
De minimis provision
A de minimis provision applies whereby recognised overseas schemes (or sub-funds of an umbrella scheme) which have been marketed to UK retail investors but are no longer so marketed, are not covered by the VAT exemption if less than 5% of their shares or units are held by UK retail investors at the time that active marketing ceases.
Recognised overseas funds/sub-funds which were not actively marketed as at 1 October 2008 and afterwards will still fall within the exemption if more than 5% of their shareholders are UK retail investors (under a best efforts calculation).
Item 10 (amended from 1 October 2008) exempts the management of ‘closed-ended collective investment undertakings’ which have the sole objective of investing capital raised from the public wholly or mainly in securities.
In line with the Claverhouse case, fund management services for investment trust companies (ITCs) and venture capital trusts (VCTs) are exempt from VAT. In addition, fund management services in respect of any other closed-ended CIU which satisfies certain conditions are also exempt. Real estate investment trusts (REITS) are unlikely to meet the condition for investment ‘wholly or mainly in securities’.
The conditions referred to above take account of criteria similar to those for the open-ended funds in item 9. All of the CIU’s ordinary shares must be included in the UK official list and be traded on a regulated UK market, that is, the main London Stock Exchange, the PLUS trading platform for listed securities or SWX Europe, but not unregulated markets such as AIM. If the CIU satisfies the conditions in the definition (set out in Note (6) to Group 5), it will qualify for the exemption regardless of where it is established.
As noted above, the VAT exemption concerns the management charge or fee which is normally deducted from the assets in the CIU periodically. For UK open-ended funds, the manager is required by regulation to be a separate entity.
The term ‘management’ also includes certain activities of administering the CIU as well as investment management of the assets.
If a third party is delegated to carry out a package of administrative services which overall has the distinct characteristic of a single supply of fund management services, this too will be exempt.
Trustee and depositary services in relation to funds are always taxable.
Having established whether a supply of fund management falls within item 9 or 10, by reference to whether the CIU itself is defined in those items, the normal partial exemption rules apply. Input tax incurred on costs which are used exclusively to make exempt supplies is not deductible. Similarly, input tax attributed to exempt supplies under a partial exemption method is not deductible. It should be noted that services which are exempt under items 9 or 10 are not included in the Specified Supplies Order (SI 1999/3121) which means there is no right to deduct input tax, even if the customer is established outside the EU.
Fund management services concerning funds which are not defined in items 9 or 10 are subject to UK VAT if the customer of the services (for example the fund) is established in the UK, but are outside the scope of UK VAT and carry a right to deduct if the customer is established outside the UK.
More detailed guidance on fund management services and the topics discussed above can be found in the VAT Finance Manual (VATFIN5000).
‘Wrapper’ products hold investments in a tax efficient wrapper making them free of income and capital gains tax, and are aimed at trying to stimulate the general public into saving and investing money. Examples of these products (current and historical) include Individual Savings Accounts (ISAs), Child Trust Funds (CTFs), Personal Equity Plans (PEPs) and Self- Invested Person Pensions (SIPPs). See the VAT Finance Manual (VATFIN5600) for more information on these products and the VAT treatment of the associated charges.
An agreement was entered into on 1 April 1994 between HMRC and the Investment Management Association (formerly the Association of Unit Trusts and Investment Funds or ‘AUTIF’) concerning the VAT treatment of PEP managers’ charges. This was used in subsequent years as a basis to determine the treatment of charges in respect of other tax efficient wrapper products.
Following discussions with industry representatives, the AUTIF Agreement has now been withdrawn and replaced with the tax treatments outlined in the VAT Finance Manual (see paragraph 7.7 above).
A wrap account is an arrangement that holds a range of investments, providing a single point of contact and management for investors and their agents.
A wrap manager is usually a separate legal entity within a financial services or insurance group that offers to hold, manage and administer the whole or part of an individual’s portfolio. The wrap account itself might typically be an interest-bearing bank account, with a set of sub- accounts, allowing payments to be made and received within broad product silos.
The wrap manager nominates a third-party discretionary investment manager and an execution-only broker. The discretionary investment manager generally offers, or is required by the wrap manager to offer, nominee account services. It may also offer custody services, or these may be provided by another entity.
The typical charging structures for wrap products are based on transaction charges, calculated by reference to the value of investments within the wrap account (taken as a strong indicator of activity going through the account), including dividends, interest, and principal amounts. Because the nature of the supplies made in connection with a ‘Wrap’ account vary from one product to another, the VAT liability of wrap related services depends upon whether the supplies in question fall within the VAT exemptions for either principal or intermediary financial services. For further information on wrap accounts and their VAT treatment please see the VAT Finance Manual (VATFIN5500).
Derivatives are financial instruments, the price of which is directly dependant upon the value of the underlying commodity, financial instrument or currency. To establish the VAT liability of the derivative, you first need to know what the ‘underlying’ product is.
This part of the notice is concerned with financial derivatives, that is to say, instruments traded on financial services such as currencies, interest rates or securities rather than an underlying raw material or commodity. It also concerns contracts, which are financial services such as contracts for difference and weather derivatives. Commodity derivatives are covered in Public Notice 701/9 Commodities and terminal markets. The trading of gold is covered in Public Notice 701/21 Gold.
Financial futures are exempt from VAT. If you are an agent or intermediary involved in the sale or purchase of a financial future you should see paragraph 8.12 and section 9 for more information about the liability of your supply.
(a) Cash settled contracts
Cash settled contracts are those contacts where there are no underlying deliverable securities or contracts, which are only capable of financial settlement.
The supply of cash settled contracts for a consideration is exempt from VAT. If the purchaser is a business based outside the UK, your supply is outside the scope of UK VAT and input tax is recoverable subject to the normal rules.
Where a futures contract runs to maturity, there is no further supply for VAT purposes. Cash settlements under these contracts are not consideration for a supply and must be excluded from partial exemption calculations and VAT returns.
(b) Non-cash settled contacts
Non-cash settled contracts are those contracts where there are underlying deliverable securities.
The supply of a non-cash settled contract is exempt.
If the purchaser is a business based outside the UK, the supply is outside the scope of UK VAT and input tax is recoverable subject to the normal rules.
If a contract runs to maturity there is a separate exempt supply of the underlying security. Transactions on exchanges are treated as being made between either the member and the client or the member and the relevant clearing-house. The value of the supply of the securities is the price that was agreed when the contract was made.
(a) Fees charged by members
Members of certain exchanges deal as principals and the ‘turn’ (sometimes described as ‘commission’) charged by the member to a client for transacting a financial futures contract represents the value of the member’s supply. A member may charge for each leg, or for a ‘round trip’ in a closed-out transaction; the full value of each charge will be the measure of the supply for VAT purposes. Whether it is called the ‘turn’ or ‘commission’, you are a principal and the charge is consideration for an exempt supply of financial futures. If your client is a business and belongs outside the UK, your supply is outside the scope of UK VAT. Input tax may be recovered if your client is also outside the EU.
If you are a member and act for another member in executing a transaction then you are a principal and the ‘turn’ or ‘commission’ you charge is exempt. The value of the supply is the amount you charge to the member.
Clearing fees charged by a clearing member to a non-clearing member are also consideration for an exempt supply.
(b) Client to member transactions
There is no supply by a client to a member in a closed-out financial futures transaction. This is because the client purchases an equal and opposite contract and is the recipient rather than the supplier.
(c) Margin payments
Margin payments (whether initial or variation) fall outside the scope of VAT.
Financial options are exempt from VAT. If you are an agent or intermediary involved in the sale or purchase of a financial option you should see paragraph 8.12 and section 9 for more information about the liability of your supply.
The sale of an option as a financial instrument is a supply of services separate from the underlying transaction to which the option relates.
There are three main types of financial options contracts (for commodity options see Public Notice 701/9Commodities and terminal markets):
(a) Options based on financial futures contracts
Options on short-term interest rate futures, index based futures and cash settled futures are exempt from VAT. (These are options on cash settled contracts.)
You do not make a further supply when an option is exercised to obtain or supply the underlying futures contracts.
(b) Equity options
These options have equities, rather than financial futures contracts, as the underlying instrument and they are exempt from VAT. If such an option is exercised there will be a further exempt supply of equities. (These are options on non-cash settled contracts.)
(c) Index-based options
Unlike equity options described at (b) above, index-based options do not provide for delivery but are cash settled. This type of option is exempt (as an option on a cash settled contract).
When you sell a financial option in return for a premium you have granted a right. The value of your supply is the premium you charge and your supply is exempt. If your customer is a business based outside the UK your supply will be outside the scope of UK VAT. You may be able to recover input tax if your customer is based outside the EU, subject to the normal rules.
Locals are traders registered to members of exchanges who act in an independent capacity to some degree, but in the embodiment of the member to whom the local is registered. Locals can be employees, self-employed or engaged in a joint venture or partnership with a member. The VAT treatment depends on the status of the local.
(a) Employee locals
Employee locals may manage or trade on an account for their member and will be on the member’s payroll. The payments from the member to the local are outside the scope of VAT.
(b) Self-employed locals
Self-employed locals may trade on their own account. When the local makes a trade it is the member who is the principal to the contract. However, when the trade is completed there is another contract between the member and the local, now in the same position for VAT purposes as a third party client, in which both parties are also principals (that is to say, there is a back-to-back arrangement). The supply made by the member to the client is an exempt supply of a financial futures contract.
A self-employed local may also act as the embodiment of the member with which the local is registered. For VAT purposes the local is acting as an agent – you should see paragraph 8.12 and section 9 for further information about the liability of the agent’s supplies.
(c) Joint ventures and partnerships
Where the local and the member are engaged in a joint venture or partnership, every trade executed by the local is a trade of the member to whom the local is registered and the rules regarding transactions by members discussed above will apply to this initial transaction.
The VAT liability of the remuneration received by the local under the joint venture or partnership arrangements will depend on the nature of the agreement between the parties.
Financial futures and options can also be traded OTC. These are non-standard contracts traded off-exchange. Both are exempt from VAT and if you are an intermediary see paragraph 8.12 and section 9 for more information.
The value and liability of the supplies made for VAT purposes depends on whether you are a principal or an agent in respect of transactions in financial futures and options contracts traded on non-UK exchanges. The rules of the overseas exchange and the local legislation could also have a significant effect on how your transaction should be viewed for UK VAT purposes. Each transaction must be examined and the VAT liability determined on its own merits.
For VAT purposes, during the term of the swap there is a continuous supply of services and, to the extent that any money changes hands, there is an exempt supply under the VAT Act, Schedule 9, Group 5, item 1.
Currency swaps are similar but have a different VAT treatment.
Currency swaps provide both a currency and interest hedge. For VAT purposes no supply takes place in relation to the exchange of principal amounts of underlying loans in currency swaps.
This is betting on financial instruments and works in the same way as sports spread betting. It involves speculating by placing a bet on an index – one that is not created by a bookmaker – for example, commodity prices or the FT-SE100 index. In the same way as sports betting, financial spread betting is liable to General Betting Duty and is exempt from VAT under the VAT Act, Schedule 9, Group 4. Duty is calculated by the bookmaker based on the total amount due from customers less any winnings paid out. The duty rate for financial spread bets is 3 per cent of the gross margin. It remains exempt from VAT under the same Group.
CFD’s offer speculators the opportunity to buy or sell the performance of a share, equity etc., without the need to own the underlying asset. A contract for differences provided for a consideration (turn/commission etc.) is an exempt supply of financial services. The CFD is treated as a cash settled contract for the purposes of defining the VAT liability of an intermediary’s supply (see paragraph 8.12 and section 9).
If you act as an agent, broker or other intermediary for supplies of financial derivatives your service may be exempt from VAT. The rules are different depending on the type of financial service that is provided and so you must find out whether you are arranging a cash settled contract or a non-cash settled contract.
(a) Cash settled contracts
Your supply will be exempt if:
(b) Non cash settled contracts falling within item 6
Your supply will be exempt if:
For information about cash settled and non-cash settled please see paragraph 8.2.
A supplier of an exempt intermediary service is a person who:
A ‘financial service’ for the purposes of the intermediaries’ exemption is a service listed in the VAT Act, Schedule 9, Group 5, items 1 to 4 and 6 (see paragraph 10.5).
Work preparatory to the completion of a contract refers to work done of a specialised nature. This could include helping to set the terms of the contract or making representations on behalf of a client, but would not include work done of a general nature such as administrative or clerical formalities.
Even though the issue of securities is not a supply for VAT purposes (see paragraph 6.1), provided you are introducing someone seeking to purchase the securities to someone issuing the securities (or vice versa) the service will still be exempt. No work preparatory to a contract need be undertaken.
Services in connection with market research, product design, advertising, promotional or similar services are not covered by the exemption. In addition, you are not an intermediary if you are making supplies of credit management to the person granting the credit. See paragraph 4.10 for further information on credit management.
Financial investigation includes activities such as checking the validity of documents, normally on behalf of a financial institution. These services are taxable.
If you only provide advice (for example, on capital raising or on defending take-over bids) your supply is taxable (see paragraph 6.14). Where advice leads to or is associated with a transaction in securities by the client, then the services may themselves be exempt as a provision of intermediary services for a transaction in securities, but only if it meets the criteria set out in paragraph 9.1.
These principles may be applied to contracts that are aborted, but in some circumstances it would be necessary to apportion the liability of the supplies between taxable advice and exempt intermediary services.
You should see paragraph 1.7 for further information on ascertaining the VAT treatment of such supplies.
Soft commissions are an arrangement by which an intermediary can use his income from the provider to fund (either directly or indirectly) some of his client’s costs, in recognition of the amount of business the client will (or has) put his way.
Soft commissions are outside the scope of VAT as they do not represent consideration for any supply.
If you only provide advice your supply is taxable (see paragraph 6.14).
If you act between your customer and the provider of a financial product, and you meet the criteria set out in paragraph 9.1, then your supply will be exempt.
If you provide both advice and you act between your customer and the provider of a financial product it is important to establish which of the two elements of your service predominates. Where your advice directly results in your customer taking out a financial product and you meet all the criteria for intermediary services in paragraph 9.1, the whole of your service – including the advice element – will be exempt. The advice is seen as ancillary to an exempt intermediary service. If you receive commission from the finance product provider, it is consideration for a separate exempt supply by you of intermediary services.
If, on the other hand, your advice far outweighs the work done to arrange a contract (for example, because a customer has received a general financial health-check, with advice covering a range of financial issues, but then only buys a minor product requiring minimal intermediation), the intermediary service is ancillary to the advice, and VAT is due on the whole supply.
You should see paragraph 1.7 for further information on ascertaining the VAT treatment of such supplies.
This paragraph applies to circumstances where IFA firms operate as networks through agreements with persons known as appointed representatives (ARs) for whom the authorised IFA firm takes regulatory responsibility. These arrangements enable the AR to carry out regulated activities without the need to be authorised directly by the Financial Services Authority (FSA).
These network arrangements are permitted under UK legislation and are subject to strict regulatory rules. In particular, the following should apply:
When networks operate in this way, in effect a ‘sub-agency’ or ‘sub-contract’ arrangement exists between the network and the ARs. The network acts as principal, making supplies of financial intermediary services to the financial product providers and of advice and/or financial intermediary services to the clients. The networks effectively sub-contract their functions to the ARs who interact directly with the client and the product providers in the provision of individual supplies on behalf of the network.
This means that:
This VAT treatment will not apply to supplies made by networks that do not operate in the way outlined above (for example, firms, which on first appearance look like networks, but are not authorised entities and are set up to provide marketing and/or compliance support services to directly authorised IFA firms). In the event of any doubt, businesses are advised to contact the Helpline.
Services provided to UK customers or to private individuals belonging elsewhere within the EU are exempt and services provided to business customers belonging elsewhere in the EU are outside the scope of VAT. There is no entitlement to deduct related input tax in relation to such supplies except where an ‘underlying supply’ gives rise to an entitlement (see paragraph 9.12).
Services provided to customers belonging outside the EU are outside the scope of VAT and carry an entitlement to deduct related input tax.
Where an intermediary makes exempt or outside the scope supplies to customers belonging in the EU, an entitlement to deduct input tax will also arise if the services are in relation to an underlying supply made to a person belonging outside the EU. For example, the services of an intermediary who arranges a sale of shares from a UK customer to a Japanese counterparty will be exempt but, because the place of the underlying supply is outside the EU, carry an entitlement to deduct related input tax.
It should be noted that there must be an underlying supply and there will be no entitlement to deduct input tax in relation to underlying transactions, such as issues of securities, which are not supplies for VAT purposes.
What if my intermediary service contains more than one component?
If you provide services that include market research, product design, advertising, promotional or services of a similar nature, your supply may still be exempt, provided that they are ancillary to the overall exempt intermediary service (see paragraph 1.7).
What if the financial service is not completed?
If you perform intermediary services in respect of a financial transaction that is not completed, your supply is still exempt.
What if there is more than one intermediary involved?
Your supply will still be exempt provided the relevant conditions set out in paragraph 9.1 are met.
What if my service is paid for in different ways?
Regardless of the fee structure, the VAT liability will depend upon the nature of the service provided.
What if my service is not paid for?
A service provided for no consideration is not a supply and so is outside the scope of UK VAT.
The paragraphs in this section are extracts from the relevant pieces of UK legislation that cover the zero-rate for bank notes zero-rating and the exemption for financial services.
(1) Where a taxable person supplies goods or services and the supply is zero-rated, then, whether or not VAT would be chargeable on the supply apart from this section
(a) no VAT shall be charged on the supply but
(b) it shall in all other respects be treated as a taxable supply
and accordingly the rate at which VAT is treated as charged on the supply shall be nil.
(2) A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 8 or the supply is of a description for the time being so specified.
(1) A supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 9 and an acquisition of goods from another member State is an exempt acquisition if the goods are acquired in pursuance of an exempt supply.
(2) The Treasury may by order vary that Schedule by adding to or deleting from it any description of supply or by varying any description of supply for the time being specified in it, and the Schedule may be varied so as to describe a supply of goods by reference to the use which has been made of them or to other matters unrelated to the characteristics of the goods themselves.
1. The issue by a bank of a note payable to bearer on demand.
1. 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.
2. The making of any advance or the granting of any credit.
2A. The management of credit by the person granting it.
3. The provision of the facility of instalment credit finance in a hire-purchase, conditional sale or credit sale agreement for which facility a separate charge is made and disclosed to the recipient of the supply of goods.
4. The provision of administrative arrangements and documentation and the transfer of title to the goods in connection with the supply described in item 3 if the total consideration thereof [sic] is specified in the agreement and does not exceed £10.
5. The provision of intermediary services in relation to any transaction comprised in item 1, 2, 3, 4 or 6 (whether or not any such transaction is finally concluded) by a person acting in an intermediary capacity.
5A. The underwriting of an issue within item 1 or any transaction within item 6.
6. The issue, transfer or receipt of, or any dealing with, any security or secondary security being –
(a) shares, stocks, bonds, notes (other than promissory notes), debentures, debenture stock or shares in an oil royalty, or
(b) any document relating to money, in any currency, which has been deposited with the issuer or some other person, being a document which recognises an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable, or
(c) any bill, note or other obligation of the Treasury or of a Government in any part of the world, being a document by the delivery of which, with or without endorsement, title is transferable, and not being an obligation which is or has been legal tender in any part of the world, or
(d) any letter of allotment or rights, any warrant conferring an option to acquire a security included in this item, any renounceable or scrip certificates, rights coupons, coupons representing dividends or interest on such a security, bond mandates or other documents conferring or containing evidence of title to or rights in respect of such a security, or
(e) units or other documents conferring rights under any trust established for the purpose, or having the effect of providing, for persons having funds available for investment, facilities for the participation by them as beneficiaries under the trust, in any profits or income arising from the acquisition, holding, management or disposal of any property whatsoever.
7. [Omitted by SI 1999/594, article 4]
8. The operation of any current, deposit or savings account.
9. The management of an authorised unit trust scheme or of a trust based scheme.
10. The management of the scheme property of an open-ended investment company.
(1) Item 1 does not include anything included in item 6.
(1A) Item 1 does not include a supply of services which is preparatory to the carrying out of a transaction falling within that item.
(2) This Group does not include the supply of a coin or a banknote as a collectors’ piece or as an investment article.
(2A) [Omitted by SI 2003/1569, article 2(d)]
(2B) [Omitted by SI 2003/1568, article 2]
(3) Item 2 includes 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.
(4) This Group includes any supply by a person carrying on a credit card, charge card or similar payment card operation made in connection with that operation to a person who accepts the card used in the operation when presented to him in payment for goods or services.
(5) For the purposes of item 5 ‘intermediary services’ consist of bringing together, with a view to the provision of financial services –
(a) persons who are or may be seeking to receive financial services, and
(b) persons who provide financial services,
together with (in the case of financial services falling within item 1, 2, 3 or 4) the performance of work preparatory to the conclusion of contracts for the provision of those financial services, but do not include the supply of any market research, product design, advertising, promotional or similar services or the collection, collation and provision of information in connection with such activities.
(5A) For the purposes of item 5 a person is ‘acting in an intermediary capacity’ wherever he is acting as an intermediary, or one of the intermediaries, between –
(a) a person who provides financial services, and
(b) a person who is or may be seeking to receive financial services.
(5B) For the purposes of notes 5 and 5A ‘financial services’ means the carrying out of any transaction falling within item 1, 2, 3, 4 or 6.
(6) For the purposes of this Group -
'authorised open-ended investment company' and 'authorised unit trust scheme' have the meaning given in section 237(3) of the Financial Services and Markets Act 2000.'closed-ended collective investment undertaking' means an undertaking in relation to which the following conditions are satisfied -
(a) its sole object is the investment of capital, raised from the public, wholly or mainly in securities; and
(b) it manages its assets on the principle of spreading investment risk; and
(c) all of its ordinary shares (of each class if there is more than one) or equivalent units are included in the official list maintained by the Financial Services Authority pursuant to section 74(1) of the Financial Services and Markets Act 2000; and
(d) all of its ordinary shares (of each class if there are more than one) or equivalent units are admitted to trading on a regulated market situated or operating in the United Kingdom
'collective investment scheme' has the meaning given in section 235 of the Financial Services and Markets Act 2000;
'Gibraltar collective investment scheme' means -
(a) a collective investment scheme to which section 264 of the Financial Services and Markets Act 2000 applies pursuant to an order made under section 409(1)(d) of that Act; or
(b) a collective investment scheme to which the Financial Services and Markets Act 2000 applies pursuant to an order made under section 409(1)(f) of that Act;
'individually recognised overseas scheme' means a collective investment scheme declared by the Financial Services Authority to be a recognised scheme pursuant to section 272 of the Financial Services and Markets Act 2000;
'recognised collective investment scheme authorised in a designated country or territory' means a collective investment scheme recognised pursuant to section 270 of the Financial Services and Markets Act 2000;
'recognised collective investment constituted in another EEA state' means a collective investment scheme which is recognised pursuant to section 264 of the Financial Services and Markets Act 2000;
'regulated market' has the meaning given in section 103(1) of the Financial Services and Markets Act 2000;
'sub-fund' means a separate part of the property of an umbrella scheme that is pooled separately;
'umbrella scheme' means a collective investment scheme under which the contributions of the participants in the scheme and the profits or income out of which payments are to be made to them are pooled separately in relation to separate parts of the scheme property.
(6A) A collective investment scheme, or sub-fund, that is not for the time being marketed in the United Kingdom is to be treated as not falling within item 9(c) to (j) if -
(a) it has never been marketed in the United Kingdom, or
(b) less than 5% of its shares or units are held by, or on behalf of, investors who are in the United Kingdom.
(7) [Omitted by SI 2003/1569, article 2(g)]
(8) [Omitted by SI2008/2547, article 3(6)
(9) [Omitted by SI 2003/1569, article 2(i)]
(10) [Omitted by SI 2008/2547, article 3(6)
Your Charter explains what you can expect from us and what we expect from you. For more information go to www.hmrc.gov.uk/charter
If you have any comments or suggestions to make about this notice, please write to:
HM Revenue & Customs
VAT Deductions & Financial Services Team
100 Parliament Street
London SW1A 2BQ
Please note this address is not for general enquiries.
For your general enquiries please phone our Helpline 0300 200 3700.
If you are unhappy with our service, please contact the person or office you have been dealing with. They will try to put things right. If you are still unhappy, they will tell you how to complain.
If you want to know more about making a complaint go to hmrc.gov.uk and under quick links, select Complaints and appeals.
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We may get information about you from others, or we may give information to them. If we do, it will only be as the law permits to:
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