Loan arrangement services provided to a UK bank

The taxpayer T provided outsourced loan administration services to a range of banks and building societies. In particular it provided services to S a supplier of mortgage loans.

T 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. After an HMRC review which reached the same conclusion T appealed to the First-tier Tribunal which upheld HMRC’s view (TC6459). T appealed to the Upper Tribunal.

The Upper Tribunal undertook a thorough review of previous cases on the meaning of transactions concerning payments or transfer within the principal VAT directive Art 135(1)(d). The bank had delegated to T the function of recovering interest and principal from borrowers but crucially it had not delegated the...