Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

VAT Finance Manual

From
HM Revenue & Customs
Updated
, see all updates

Intermediaries: When is someone acting as an intermediary?: Key factors

An intermediary for the purposes of the finance exemption must:

  • be providing an intermediary service in relation to an exempt financial transaction (that is, the transaction of one of the parties must itself fall within items 1, 2, 3, 4 or 6 of Group 5);
  • be acting in an intermediary capacity (i.e. bringing together someone seeking a financial service with someone providing a financial service); and
  • if the transaction falls with items 1, 2, 3 or 4, be carrying out work preparatory to the conclusion of contracts for the provision of those financial services.

Therefore, in deciding whether something is an intermediary service, the key factors are those set out above rather than, for example, how the person is paid (e.g. by commission or fee) or by their professional status.

The flowchart contained in VATFIN7280 combined with the following paragraphs, will assist you in deciding whether someone is acting as an intermediary for the purposes of item 5.

What does “… providing an intermediary service …” mean?

There are two criteria that need to be met if someone is to be providing an intermediary service. These criteria are:

  • they must bring together someone seeking a financial service with someone providing a financial service; and
  • if the service falls within items 1 to 4 they must perform work preparatory to the conclusion of contracts for the provision of those financial services.

In the ECJ judgment in the case of CSC Financial Services Ltd (“CSC”- Case C-235/00 – [2002] STC 57) the court referred to this as “…a distinct act of mediation”. CSC is discussed in greater detail in VATFIN7230.