Target Group Ltd – Supreme Court Judgment – whether loan administration services exempt – no – taxpayer loss

Shawbrook Bank provides mortgages and loans, while Target administers the loans on behalf of Shawbrook. Target’s services include creating loan accounts, recording account information, interacting with borrowers, setting up direct debit instructions, processing payments, and reconciling loan accounts. The taxpayer requested clearance from HMRC to treat its supplies as a single exempt supply of payment processing. The taxpayer argued that its services fell within the exemption because they involved payments and transfers, as well as inputting entries into borrowers’ loan accounts. The Supreme Court considered relevant case law and highlighted the need for services to fulfill the specific functions described in the exemption. It noted that there was some uncertainty regarding whether the services themselves must have the effect of transferring funds and making changes, or if it was sufficient for them to have a causal effect. The Court referred to previous domestic cases and acknowledged that doubts had arisen about the interpretation of the exemption.

Source KPMG

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