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HMRC internal manual

VAT Finance Manual

HM Revenue & Customs
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Money (including transfer of money) and related services: examples of services and products not falling within item 1: cash collection services

Both small and large companies are involved in cash collection, and their services may include other elements, such as counting, sorting and distributing money (see VATFIN2420).

Banks or their suppliers may argue that a service, which only involves the physical movement of money, often performed by security businesses on behalf of financial institutions such as banks, is exempt ‘dealing with money’. But the services performed could easily relate to any other type of goods. For the exemption to apply the service must deal with money as money and not purely as goods. This is illustrated in two tribunal cases - Williams and Glyn’s Bank Ltd (decision 188) and Nationwide Anglia Building Society (decision 11826B).

Williams & Glyn’s Bank Ltd

In *Williams & Glyn’s Bank Limited *the bank appealed against the Commissioner’s decision that VAT should be charged by Securicor for the transport of ‘Secured Packages’ and ‘Tied Bags’, containing money and other documents of monetary value between branches of the bank.

The bank submitted that the services supplied by Securicor represented a ‘dealing with money’ within Group 5, item 1. It also put forward an alternative argument that the delivery of the money enabled the banks to carry out their functions of paying cheques etc and therefore the service could be viewed as ‘making arrangements for’ transactions under item 1.

The appeal was dismissed on both grounds because the services did not have sufficient of the characteristics of a financial transaction.

Nationwide Anglia Building Society

The tribunal case of Nationwide Anglia Building Society again concerned services provided by Securicor, but in connection with Automatic Teller Machines (ATMs). The service involves collecting money and transporting it to Nationwide’s ATMs in containers (cassettes). These were loaded and the used containers unloaded, the remaining cash in the used container counted and reconciled to a reading.

Nationwide contended that either all or all except the transport element, of Securicor’s services were exempt. They considered that Securicor was operating their ATMs, including reconciling the money involved. The Commissioners’ view was that the services were similar to those of Williams & Glyn’s in being the movement of goods with some ancillary services.

In dismissing the appeal the tribunal concluded,* In no part of this cycle is there any dealing with money as money. Nationwide’s bank balance is exactly the same at the end. The service performed by Securicor could just as well relate to any other goods, which might be counted, packed, delivered, collected and reconciled. The money is not used as money; it remains Nationwide’s money throughout. The dealing with money takes place when the customer withdraws money from the ATM … Securicor is not taking part in a dealing with money as money. It is providing services which may be an essential prerequisite of that dealing with money, but those services are only exempt if they are themselves a dealing with money*.

Therefore the service of transport and the loading and unloading of the ATM machines was seen as a single taxable supply.

Neither of the services in the above tribunal cases contain the specific, essential function of a financial transaction and have not effected a legal and financial change.

When looking at cash collection services, therefore, it is important to look at what else the business is supplying. If there is something about the service which may have the specific, essential function of a financial transaction and that actually effects a legal and financial change (see VATFIN2200) provided it is not ancillary to a supply of transportation, it may be exempt. VATSC80000 will help you to decide what is ancillary.