Securities and related services: trading platforms
A trading platform is an online/internet based service that can offer a range of tools to enable traders and investors to view, analyse, monitor and execute trades.
They can be used to place orders for financial products such as stocks, bonds, currencies, commodities and derivatives over a network with a financial intermediary/advisor. A financial intermediary could include a broker, market maker, stock exchange or investment bank.
Trading platforms can also provide access to information/data about specific types of transaction and live market prices on a variety of financial products.
Trading platforms can differ on characteristics like size, independence, speed of delivery and target market.
Liability of Platform Services
Platform services are fact specific. When considering the VAT treatment it is important to consider who is supplying the platform service and what this person is supplying to its customers. As platforms have to be transparent in their charging structure, the client should be aware/notified of the services they are receiving for the fee charged
Matching is effected when the platform allows
- Platform users/members to offer or insert bids for exempt financial products (such as shares and currencies) at specified prices and
- Platform users/members to accept offers available on the platform (or otherwise insert counter-offers and bids).
The service of matching of bids and offers by a platform provider/operator in order to bring about a trade in securities, debt and currencies is exempt under item 5 Group 5 Schedule 9 VATA 94.
Fees for matching services are normally charged on a transaction basis.
The supply of data/information services by a platform provider/operator such as market and trade related data on specific financial instruments or financial news such as stock market announcements is taxable at standard rated
Electronic data services that simply provide subscribers with a message facility are also taxable at standard rated.
Access/gateway to platform
Where a platform provider/operator offers matching services only and does not offer optional supplies of information/research/data services, the connection fee will be ancillary to the matching service and will therefore be exempt.
Where a platform offers a package of optional services that includes matching and additional information/research/data services then a charge for connectivity will be taxable at the standard rate as each optional service is treated as a separate supply.
Platform membership/subscription fees are taxable at the standard rate.
The lease or sale of platform software is taxable at the standard rate.
Revenue Share Arrangements
Platform operators/providers will often enter into revenue share arrangements with banks which become founding members of the platform. Under these arrangements the platform operator will offer different types of payments to the founding member bank. In some cases only a single payment is offered, in others there will be several payment options available. These could include a discount in the brokerage (or user) fees placed on the platform by the founding member bank or revenue shares and liquidity payments
Whether or not VAT is due on these payments/discounts will depend on whether that payment is directly linked to a reciprocal benefit or benefits - e.g. payments, or discounts on trading commissions, that are contingent upon the founding member bank introducing new customers to the platform and are calculated accordingly will be consideration for taxable supplies. Where the founding member bank receives/provides no reciprocal benefit for payment (other than say an entitlement to a share in the overall profits of the platform) then there will be no supply for VAT purposes and the payments will be outside the scope of VAT. Please see VAT supply and consideration for further information.
Other types of platforms
For guidance on the VAT treatment of services provided by investment and crowd funding platform providers/operators, please see the links below.