Topic: Indirect tax( VAT) in banking industry (financial services)

Hello, Everyone.
I do need your help to give me the following information as I will have an interview for the role of VAT/indirect tax in bank which I have never involved in and I am not a specialist for VAT either.
Could you tell me some examples why they still have VAT taxable supplies as they normally are exempted due to financial services?
What VAT aspects or VAT treatment do banking industries have? Are there any specail VAT rules especially for VAT in banking industries?
Are there any VAT( recent)issues in particularly banking industry I should know about ?
Thank you very much for your time and kind assistnace in advance.

Re: Indirect tax( VAT) in banking industry (financial services)

Generally, supplies of financial services are exempted under the provisions of Group 5 Schedule 9 VATA 1994. Exemption also extends to intermediary services supplied in relation to exempt financial transactions.

However administrative functions, accountancy functions, credit management and processing services are not exempt financial services but rather are standard-rated for VAT. Also standard-rated are services preparatory to transactions in money, securities for money, notes or orders for payment of money (e.g. data-preparation work for transferring funds between bank accounts).

The case of FDR Ltd established that a company which processed credit card transactions for clearing banks and retailers could be providing an exempt service, on the grounds that:

• it was providing a single, compound service rather than a range of different services which might have different liabilities;
• a major part of that service was effecting the transfer of the funds at the end of the day;
• it was therefore involved in financial transactions, and the whole of the service took its character from that, and was exempt within Group 5 Sch 9.

The nature of the company's service needs to be examined carefully to find out if it is involved in financial transactions, or is merely carrying out administrative and accountancy functions.