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HMRC internal manual

VAT Finance Manual

From
HM Revenue & Customs
Updated
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Money (including transfer of money) and related services: interpreting item 1: what is meant by ‘any note or order for the payment of money’

A note for the payment of money is a banknote. An order can include postal orders, giros and cheques etc., but can be as informal as an ‘IOU‘. You should, however, check that there is a supply for VAT purposes in the first place, before deciding on the liability (see VATSC03200). The actual price paid is the consideration for the supply and amounts payable on redemption remain outside the scope of VAT.

An example of a supply of an ‘order for the payment of money’ is where a building society charges its customer a fee for withdrawing funds by cheque. This fee is consideration for an exempt supply under item 1. There is no such exempt supply when a customer writes a cheque in return for goods or services because the payment is consideration for the goods or services.

The issue here is whether money (or notes representing money) is itself a supply for VAT purposes or whether it is consideration for a supply. If the building society charged its customer a fee for the cheque and the cheque was made out to a retailer as payment for goods, there would be

  1. a supply of issuing an order for money by the building society (exempt) and
  2. consideration to the retailer (for a taxable supply of goods).

The customer is not making a supply by paying for the goods.