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HMRC internal manual

VAT Finance Manual

Intermediaries: legal provisions

Under Article 135 (1) of the VAT directive intermediary services are exempt as ‘negotiation’. It applies to the following financial services:

* credit 135(1)(b)
* credit guarantees or any security for money 135(1)(c)
* deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments 135(1)(d)
* currency, bank notes and coins used as legal tender and 135(1)(e)
* shares, interests in companies or associations, debentures and other securities 135(1)(f)

This has been enacted into UK law as the provision of intermediary services in the VAT Act 1994, Schedule 9, Group 5, item 5 as follows:

The provision of intermediary services in relation to any transaction comprised in item 1, 2, 3, 4 or 6 (whether or not any such transaction is finally concluded) by a person acting in an intermediary capacity.

Notes (5), (5A) and (5B) state:

(5) For the purposes of item 5 “intermediary services” consist of bringing together, with a view to the provision of financial services -
  1. persons who are or may be seeking to receive financial services, and
  2. persons who provide financial services,

together with (in the case of financial services falling within item 1, 2, 3 or 4) the performance of work preparatory to the conclusion of contracts for the provision of those financial services, but do not include the supply of any market research, product design, advertising, promotional or similar services or the collection, collation and provision of information in connection with such activities.

(5A) For the purposes of item 5 a person is ‘acting in an intermediary capacity’ wherever he is acting as an intermediary, or one of the intermediaries, between -

  1. a person who provides financial services, and
  2. a person who is or may be seeking to receive financial services.
(5B) For the purposes of Notes (5) and (5A) “financial services” means the carrying on of any transaction falling within item 1, 2, 3, 4 or 6.