View the related Tax Guidance about VAT exemption
Liability ― fund management and other investment management
Liability ― fund management and other investment managementThis guidance note covers the liability of fund management services and some other investment management services.For an overview of liability more broadly, see the Liability ― overview guidance note.For in depth commentary on the legislation and case law on the liability of fund management see also De Voil Indirect Tax Service V4.136G.A review of the fund management exemption published in 2023 concluded that there was no need to amend the UK legislation to clarify its scope. Fund management ― the basicsThe management of certain funds is exempt from VAT. A range of categories of fund are covered by this exemption. Such funds are referred to collectively as special investment funds (or SIFs) although this is technically the terminology used in EU VAT legislation. SIFs include certain open-ended and closed-ended investment undertakings, umbrellas and sub-funds, as well as some pension schemes. The fund management exemption is limited to the management of SIFs. Consequently, the management of other investment funds will generally be standard-rated.Determining whether a given service (or package of services) represents the ‘management’ of a fund within the meaning envisaged by the VAT exemption often presents practical challenges. ‘Management’ can refer to the activities of administering a SIF as well as more typical investment management activities but only where ‘viewed broadly, they form a distinct whole and are specific to, and essential for, the management of those funds’. A single supply which is used for the management of multiple funds including both
VAT liability ― overview
VAT liability ― overviewThis guidance note provides an overview of the concept of VAT liability along with links to further practical guidance on the subject.In-depth commentary on the legislation and case law associated with VAT liability is covered in:•De Voil Indirect Tax Service V4.1 ― VAT exemption•De Voil Indirect Tax Service V4.2 ― the zero rate of VAT•De Voil Indirect Tax Service V4.4 ― the reduced rate of VATIntroduction to liabilitySupplies of goods and services which are made by taxable persons in the course of their UK business activities can be subject to one of four VAT liability treatments:•standard-rated•reduced-rated•zero-rated•exemptStandard, reduced and zero-rated supplies are often referred to collectively as ‘taxable supplies’. This distinguishes them from exempt supplies. The distinction between supplies that are taxable and supplies that are exempt is important because of its consequences for input tax recovery. VAT can generally be recovered on costs which are used to make taxable supplies. However, VAT cannot generally be recovered on costs which are used to make exempt supplies. This distinction is covered in greater detail in the Input tax ― overview and Partial exemption ― overview guidance notes. The reduced-rate, the zero-rate and exemption are sometimes referred to collectively as ‘VAT reliefs’. This is because VAT is either not chargeable on sales or is chargeable at a lower rate than the standard-rate. Despite being a ‘relief’, exemption will not necessarily be a more desirable treatment than the standard-rate because of its impact
Exemption ― finance ― intermediaries
Exemption ― finance ― intermediariesThis guidance note is intended to provide details on the VAT treatment of intermediary services provided in connection with the provision of financial services. What are intermediaries?It is very common for supplies of financial services to involve other businesses acting as intermediaries between the parties buying and selling the financial services. Other businesses may also be involved in the transaction providing specialist advice or assisting with ensuring that the transaction takes place. The supply of intermediary services connected with financial services are often exempt from VAT.A supply of intermediary services consists of bringing together, with a view to the provision of financial services:•persons who are or may be seeking to receive financial services•persons who provide financial servicesThe performance of preparatory work before the conclusion of a financial services contract can be exempt from VAT. This does not include a supply of market research, product design, advertising, promotional or similar services unless it forms part of a composite supply of exempt intermediary services (see below).In order for an intermediary service to be exempt from VAT, the party must be acting in the following capacity:•must be acting as an intermediary in relation to an exempt financial services transaction•must be providing an intermediary service in relation to the exempt financial services transaction•if the financial services transaction falls within VATA 1994, Sch 9, Part II, Group 5, item 1, 2, 3 or 4, the intermediary must be undertaking work that is preparatory to the
Liability ― insurance ― agents, brokers and claims handling
Liability ― insurance ― agents, brokers and claims handlingThis guidance note examines the liability of the services of insurance agents, brokers and claims handlers.For an overview of the VAT liability of insurance more broadly, see the Liability ― insurance ― overview guidance note.For in-depth commentary on the legislation and case law, see De Voil Indirect Tax Service V4.123.Liability of services of agents, brokers and claims handlingA supply of insurance is a supply of services and is exempt from VAT, see the Liability ― insurance ― overview guidance note. The VAT exemption for insurance also applies to the services of an insurance agent or an insurance broker acting in an intermediary capacity in relation to insurance. Examples of services an insurance agent or an insurance broker may provide include:•introductory services when a person seeking insurance wants to be introduced to an insurer•claims handling services when an insurance policy holder has made a claimThe scope of the VAT exemption for insurance agents and insurance brokersThe VAT legislation provides exemption for insurance related intermediary services carried out by an insurance agent or an insurance broker. Whether or not the exemption applies is not affected by whether a contract is concluded. For example, if an insurance broker charges a client that is seeking insurance a fee for introducing them to an insurer, the fee is exempt from VAT regardless of whether the client decides to buy an insurance policy or not. What are insurance agents and insurance brokers?Insurance agents and insurance
Liability ― insurance ― overview
Liability ― insurance ― overviewA supply of insurance is a supply of services and is exempt from VAT. The VAT exemption for insurance also applies to the services of an insurance agent or an insurance broker acting in an intermediary capacity in relation to insurance. This guidance note provides an overview of the:•scope of the VAT exemption for insurance•entitlement of insurers, insurance agents, insurance brokers and insurance policy holders to recover VAT on costs•VAT treatment of insurance payments received by policy holdersIn-depth commentary on the insurance exemption can be found in De Voil Indirect Tax Service V4.121 to V4.124.Overview of the scope of the VAT exemption for insuranceThe VAT legislation provides for exemption to apply to:•insurance transactions and reinsurance transactions•the services of an insurance agent or an insurance broker acting in an intermediary capacity in relation to a contract of insurance or reinsurance regardless of whether the contract is concludedVATA 1994, Sch 9, Pt II, Group 2Whether the VAT exemption for insurance agents and insurance brokers applies does not depend on whether a contract for insurance is concluded. For example, if an insurance broker charges a client that is seeking insurance a fee for introducing them to an insurer, the fee is exempt from VAT regardless of whether the client decides to buy an insurance policy or not. For information about the VAT treatment of services supplied by insurance agents and insurance brokers, see the Liability ― insurance ― agents, brokers and claims handling
Weekly tax highlights ― 5 August 2024
Weekly tax highlights ― 5 August 2024Direct taxesGovernment announces Budget date and publishes draft Finance Bill legislationUpdated non-dom proposals and draft legislation for VAT on private school fees, Pillar 2 changes and abolition of FHLs, feature in the government’s plans for the next Finance Bill which will follow the 30 October Budget.Chancellor Rachel Reeves has confirmed that she will deliver her first Budget on 30 October 2024.In a speech to the House of Commons on 29 July 2024, reporting on the Treasury’s recent assessment of the state of public spending, the Chancellor set out a number of tax commitments, including the following.Replacement of the remittance basis from 6 April 2025 ― moving to a new four-year foreign income and gains regime based on the Conservative Spring 2024 Budget proposals, but with some changes:•the previously proposed 50% reduction on foreign income arising in the 2025–26 tax year for those who lose access to the remittance basis will not be introduced•a temporary repatriation facility for pre-6 April 2025 unremitted income and gains will be available, with the rate and duration to be announced in the October Budget•there will be a rebasing of foreign chargeable assets for CGT for former remittance basis users but the rebasing date has not been confirmedThe Treasury is to hold a series of engagement sessions over the summer, with anyone interested in the IHT and overseas workday relief sessions invited to register by 7 August.Abolition of the furnished holiday lettings regime from April 2025
Land and buildings ― income ― overview
Land and buildings ― income ― overviewThis guidance note provides an overview of the VAT treatment of generating income from land or buildings. It includes a table with an alphabetical summary of sources of income from land and buildings together with links to relevant guidance. See ‘Alphabetical summary of sources of income from land and buildings’ below.For detailed commentary on the VAT legislation and case law, see De Voil Indirect Tax Service V4.111–V4.115D.The VAT treatment of generating income from land and buildingsThe VAT legislation requires VAT to be charged on all supplies of goods and services made in the UK that are made in the course or furtherance of a business carried on by a taxable person except for supplies that are exempt from VAT. If VAT is chargeable, the rate may be the zero rate, the reduced rate or the standard rate, depending on the nature of the supply. For illustrative examples, see the table below under ‘Illustrative examples of income from dwellings and the VAT treatment that applies’. The VAT exemption for landA general VAT exemption for land is provided for by VATA 1994, Sch 9, Pt II, Group 1, but this legislation also includes a significant number of exceptions which are subject to VAT at the standard rate. In addition, VATA 1994, Sch 8, Pt II, Group 1, Item 2 provides for the zero rate of VAT to apply to supplies of animal feeding stuffs, which includes supplies of grazing rights. A practical difference between a
Exemption ― burial and cremation
Exemption ― burial and cremationThis guidance note provides an overview of the VAT treatment of services that are provided in connection with the burial or cremation of human remains.VAT treatmentThe following services are exempt from VAT:•the disposal of the remains of the dead•making arrangements connected with the disposal of the dead•services of one undertaker to another in connection with a specific funeral or cremationVATA 1994, s 31; VATA 1994, Sch 9, Pt II, Group 8, items 1 and 2; VBURC1000; De Voil Indirect Tax Service V4.151; HMRC Notice 701/32The VAT exemption only applies to the disposal of human remains. Disposal includes, burial, cremation or disposal at sea. This was confirmed in the tribunal case UFD Ltd. The burial or cremation of an animal is liable to VAT at the standard rate.The exemption under VATA 1994, Sch 9, Pt II, Group 1 (land) applies to the provision of grave space and the right to place an urn in a niche, etc.Funeral directors and undertakersIf the organisation provides a ‘funeral package’, the following goods / services will be exempt from VAT, providing the overall package includes disposing of the remains of the deceased person:•coffins•coffin cover / fittings•casket, scatter tube or urn•embalming•digging and grave preparation•transporting the deceased person to the burial or cremation ground•shroud / robe•using the chapel of rest•providing bearers•transportation of the mourners•tolling the bell and music at the service•live web streaming from the chapel of
Supplies of education
Supplies of educationThis guidance note provides an overview of the VAT treatment of education services. Overview of the main VAT treatmentThe following table provides an overview of the main VAT treatment of different supplies of education:Type of supplyVAT treatmentEducation provided free of charge by a local authority maintained school, technology college, sixth form college or academies, etcThe education services are outside the scope of UK VAT as they are not provided for business purposes. Any closely related supplies of other goods / services are also outside the scope of VAT. See the Supplies of goods and services closely related to education guidance note.The supply of school, higher or further education in exchange for a feeThe supply by an eligible body will be exempt from VAT. The organisation can also exempt from VAT any Supplies of goods and services closely related to education.If the organisation supplying the education services is not an eligible body, the supply will be liable to VAT at the standard rateSupply of private tuition (in a school or university subject) by a sole proprietor or partner (but not their employee)The tuition will be exempt from VATSupply of tuition by a companyThe supply will be liable to VAT at the standard rateTeaching English as a foreign language (EFL) by a commercial organisationThe supply of the EFL teaching will be exempt from VAT. The provision of other training will be liable to VATSupply of vocational trainingIf the training is ultimately funded
Liability ― welfare services
Liability ― welfare servicesThis guidance note examines the liability of supplies of welfare services.For an overview of the concept of VAT liability in generally, see the Liability ― overview guidance note.For in-depth commentary on the legislation and case law on supplies of welfare services, see De Voil Indirect Tax Service V4.146–V4.150.Liability of welfare services ― the basicsWelfare services can qualify for VAT exemption but only where they are supplied by certain kinds of organisations (charities, public bodies and state-regulated private providers) and the services are regarded as welfare within the VAT meaning of the term.There may also be circumstances when supplies within the welfare sphere qualify for the education exemption.As well as exemption, supplies of advice and information related to welfare services can be reduced-rated when provided by certain organisations.There will also be circumstances where the provision of welfare services is regarded as non-business and is therefore outside the scope of VAT. This can include (for example) advice and information provided free of charge and (by concession) welfare services supplied by charities at ‘significantly below cost’.Some supplies which could be regarded as welfare will not qualify for any VAT relief and will therefore fall to be standard-rated. An example would be welfare services supplied on a commercial basis by an unregulated for-profit organisation.Exemption ― welfare servicesServices can be exempt from VAT if they are both:•supplies of welfare services / goods with welfare services•made by a charity, state regulated private welfare institution (or agency) or a public bodyVATA
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