Q&A: Supreme Court judgment in Target Group Ltd

The VAT exemption applicable to transactions concerning payments/transfers was first considered in detail by the Court of Justice of the EU in SDC (Case C-2/95) in 1997. Some 26 years later the UK Supreme Court has delivered an important judgment on its scope in Target Group Ltd [2023] UKSC 35.

What are the practical implications of this case?

SDC is the leading case on the VAT exemption in the Principal VAT Directive art 135(1)(d) (the ‘payment exemption’) which applies to transactions concerning payments/transfers (and enacted in the UK by VATA 1994 Sch 9 Group 5 item 1 which exempts ‘the … transfer or receipt of or any dealing with money...’).

In SDC the CJEU held that for the exemption to apply the service in question must:

1. have the effect of transferring funds; and
2. change the legal and financial situation of the parties concerned.

What the case left...