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HMRC internal manual

VAT Finance Manual

Money (including transfer of money) and related services: securities for money, credit guarantees and related services: legal provisions

Article 135.1 (c) of the Principal VAT Directive exempts:

the negotiation of or any dealings in credit guarantees or any other security for money and the management of credit guarantees by the person who is granting the credit

The above has been enacted into UK law as the VAT Act 1994, Schedule 9, Group 5, item 1, which exempts:

1. The issue, transfer or receipt of, or any dealing with … any security for money or any note or order for the payment of money

Notes (1) and (1A) to Group 5, state:

(1) Item 1 does not include anything included in item 6.
(1A) Item 1 does not include a supply of services, which is preparatory to the carrying out of a transaction falling within that item.