VAT liability of loan administration services

The taxpayer provided outsourced loan administration services to of banks and building societies. In particular it provided services to a separate supplier of mortgage loans. The taxpayer was not involved in the making of loans or further advances.

The taxpayer asked HMRC for a ruling that its services were composite supplies of payment processing services and therefore were exempt from VAT. HMRC considered that the supplies were taxable supplies of the management of loan accounts. Both the First-tier Tribunal and Upper Tribunal agreed with HMRC so the taxpayer appealed to the Court of Appeal.

Lady Justice Simler delivered the judgment. Referring to CRC v DPAS Ltd (Case C-5/17) [2018] STC 1615 the court said the taxpayer’s activities – taken individually or as a whole – did not fulfil the functions of a financial transaction. The taxpayer did not assess the credit worthiness of the applicant nor did...