Readers’ forum: Do supplies by brokers qualify for VAT exemption?

My two clients A and B are regulated mortgage brokers who arrange buy-to-let loans to landlords via a limited company AB Ltd of which A is the sole director and shareholder. A and B are both personally involved in the business and are not otherwise connected. Upon completion of a loan AB Ltd charges the borrower a fee and receives a ‘procurement fee’ from the lender.

In a typical year AB Ltd generates £300 000 in income from commissions which after admin expenses of £30 000 leaves about £135 000 to each broker.

A and B have their own companies (A Ltd and B Ltd) which charge AB Ltd for the profit share allocated normally on a 1:1 basis. The charges of say £135 000 by each of A Ltd and B Ltd leave AB Ltd with no taxable...