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HMRC internal manual

VAT Finance Manual

Credit, debts and related services: credit and related services: purpose of VATFIN3100

Neither the VAT Act 1994, Schedule 9, Group 5, nor the VAT directive defines what is meant by the term ‘credit’. Section 9(1) of the Consumer Credit Act 1974 (as amended) gives credit the following meaning ‘a cash loan, and any other form of financial accommodation.’ Generally we see the term ‘credit’ as applying to:

  • personal loans
  • cash loans
  • overdrafts
  • mortgages (personal and commercial)
  • hire purchase
  • credit sale
  • conditional sale
  • credit cards (including affinity cards) and
  • deferred payments

The provision of credit is usually associated with banks, building societies and finance houses. However, it is now increasingly available through a range of different outlets (e.g. supermarkets and high street stores) to encourage trade and to provide a total service (a ‘one-stop shop’).

These sections cover various types of credit arrangements such as:

  • personal loans, cash loans, overdrafts, mortgages and interest on deposits (see VATFIN3110)
  • credit supplied with goods or services - hire purchase, conditional sale and credit sale (see VATFIN3120)
  • separate charges for credit (see VATFIN3125)
  • credit cards and other types of payment card (see VATFIN3140 to VATFIN3150)
  • deferred payments (see VATFIN3170) and
  • pawnbroking (see VATFIN3180).

The above sections look at the law relating to credit, consider the liability and draw on case precedent. They also look at:

Topics not covered by these sections

The following topics are only covered in VAT Notice 701/49 Finance. You should read the relevant paragraphs for guidance on liability:

  • returned or repossessed goods (sub-paragraph 4.3);
  • what supplies are not considered exempt credit (paragraph 4.4); and
  • credit management services (paragraph 4.10).