Target’s Loan Administration Services Not Exempt from VAT, Rules UK Supreme Court

• The case concerns whether outsourced loan administration services provided by Target to customers on behalf of Shawbrook fall within the financial services exemption.
• The First Tier Tribunal found that Target’s supply included transactions concerning payments or transfers within the financial services exemption but that the predominant nature of the supply was debt collection, therefore excluded from the exemption and taxable.
• The Upper Tribunal held that the services supplied by Target to Shawbrook were not exempt but were standard rated supplies for VAT purposes.
• Target appealed to the Court of Appeal, which unanimously dismissed the appeal.
• Target now appeals to the Supreme Court, which dismisses the appeal, unanimously holding that the financial services exemption did not apply to Target’s loan administration services.
• The judgment considers the CJEU case law since SDC in detail and concludes that the narrow interpretation is the correct one.
• The giving of instructions is not enough even if that inevitably results in a payment or transfer. It is necessary to be involved in the carrying out or execution of the transfer or payment – its “materialisation”.
• The making of accounting entries is not sufficient to effect a transfer of payment.
• The Court rejects Target’s two grounds for contending that its services fall within the financial services exemption.

Source: supremecourt.uk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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