The First-tier Tribunal considers whether intermediary services received by this pay day loan provider are exempt ‘negotiation of credit’.
This is a case concerning the scope of the financial intermediary exemption in the context of arranging supplies of credit and the supply of debt negotiation. Dollar Financial was the recipient of the disputed supplies rather than the supplier. It was arguing for exemption as any VAT charged to it or declared by it under the reverse charge was an absolute cost to it as it was a payday loan company making exempt supplies of credit to UK consumers. The case centred on different types of supplies from different overseas suppliers. One concerned supplies by lead generators (Leadgens). The other concerned conversion and ‘Live Chat’ services provided by a company called Allsec. The First-tier Tribunal (FTT) found for the taxpayer that the supplies received from Leadgen were exempt and therefore not subject to a reverse charge. The taxpayer’s appeal in respect of Allsec was dismissed.
A person seeking a loan through a Leadgen’s website would fill out an application form. The Leadgen would do some basic checks and pass it on to one of the Leadgen’s customers (lenders), one of whom was the taxpayer. The Leadgen would identify all its customers for whom the borrower met the loan criteria and would pass the form to whichever of those lenders would pay it the highest fee. The customer then had to decide whether to accept and pay for the lead and having done so would generally make a loan offer to the borrower. If the first customer rejected the application the Leadgen would pass the form to the next lender on the suitability list and so on. All of this checking and decision making was done in seconds and the checking the Leadgen did would be repeated by the lender. As regards the taxpayer, its criteria included the requirement for the borrower to be over 18, a UK resident, have a debit card, mobile phone, email address and an income of at least £900 a month. These criteria were not however, identical for all lenders the Leadgens passed leads to.
Allsec would call borrowers who had received a loan offer but not gone ahead with the loan, in an attempt to convert the offer into an actual loan. Allsec staff would also chat online to potential borrowers surfing the taxpayer’s website and offer them help or information. One element of ‘livechat’ was debt negotiation (where an existing borrower said in advance of payment due date that it could not make a payment, Allsec could negotiate a new loan) but this was not the predominant element. HMRC had already agreed that where Allsec acted as the taxpayer’s agent in either agreeing new loans with existing borrowers or agreeing new terms for repayment of an existing loan that was in arrears, those services (supplied separately from livechat) were exempt.
The FTT decided that the Leadgen services were exempt but the conversion and livechat services were taxable. This is another case regarding the scope of the financial intermediary exemption, in the context of supplies of credit. It is a long and detailed decision which, as far as the Leadgen services were concerned, focussed on whether the Leadgen did enough, to be more than a mere conduit or advertiser. The conversion and livechat services were not exempt because the FTT decided they did not involve acting as an intermediary. The parties had already been brought together by the time the conversion service was supplied, while live chat was, predominantly, information or help.
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