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HMRC internal manual

VAT Finance Manual

Credit, debts and related services: debts and related services: debt consolidation

Description of service

There is a variety of ways debt consolidation companies offer assistance to those in debt. One of the usual methods is for the debt consolidation company to provide a loan equal to either the value of the debts or more. This loan is secured against the debtor’s property. The debtor then uses the loan to pay off any outstanding debts with the result that he/she only has one creditor - the debt consolidation company. Interest will accrue on the amount loaned.

Supply and liability

The debt consolidation company is making a grant of credit, exempt under the VAT Act 94, Schedule 9, Group 5, item 2.

NB - For services concerning debt negotiation and debt collection see VATFIN3250 to VATFIN3255.