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HMRC internal manual

VAT Finance Manual

Money (including transfer of money) and related services: examples of services and products not falling within item 1: provision of internet payment services (IPS)

An IPS provider will typically supply its service to the Internet retailer (‘e-retailer’). Usually its sole aim is to offer a payment service and deal with the collection and distribution of customers’ payments, never taking title to the goods or services provided by the e-retailer to its customer. Therefore, where it:

  • requests payment from the merchant acquirer to the total value of the goods ordered by the customer (this might include postage and packing)
  • has the payment transferred into its bank account by the e-retailer’s customer’s merchant acquirer, where it will remain for a specified time and
  • transfers the money, less commission, via BACS or a similar agency, to the e-retailer,

we would see the core of the supply as being that of the collection of debt and thus taxable.

The liability of these types of services, which involve the collection of payments on behalf on the party to whom they are owed, was the subject of the ECJ decision in AXA (see VATFIN3255) and, in some instances services previously treated as exempt have become taxable as a result.

If you receive questions about liability from an IPS provider please contact the Financial & Commodities VAT UoE.