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 Introduction 

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An intermediary is a supplier of an exempt service which 

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• Brings together a person seeking a Financial Service with a person who provides a Financial Service

• Stands between the parties to a contract and acts in an intermediary capacity, and

• Undertakes work preparatory to the completion of a contract for the provision of financial services, whether or not it is completed

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Financial Service

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Here a Financial Service in relation to intermediaries are those services that fall under the VAT Act 1994 Schedule 9, Group 1,2,3,4 and 6. 

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 Work Preparatory 

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Work preparatory to the completion of a contract refers to work done of a specialised nature. This could include helping to set the terms of the contract or making representations on behalf of a client, but would not include work done of a general nature such as administrative or clerical formalities. 

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Note:  Even though the issue of securities is not a supply for VAT purposes, the introduction of a person seeking to purchase securities and a person issuing securities (and visa versa) does not have to engage in any preparatory work for the transaction to be Exempt. 

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Services not Covered by the Intermediary  Exemption 

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• Advertising 

• Market Research

• Promotional Services

• Product Design

• Credit Management

• Financial Investigations

• Corporate Finance (advisory)

• Financial Advice only to a client

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Note:  Where financial advice results in a customer taking out a financial product where the advice is considered ancillary to the supply of the exempt intermediary service, then the whole supply will be Exempt.  If the Financial advice far outweighs the introductory intermediary service, such as where the client has been given a complete financial review and advice, then the service will be standard rated 20%.

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VAT liability of Intermediary Supplies

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• Intermediary Services supplied to UK customer = Exempt

• Intermediary Services supplied to Non UK customer = Outside the scope with recovery (Zero Rated)

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Input VAT Recovery in Relation to Intermediary Supplies  

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• Intermediary Services provided to a UK Client (Exempt) = no entitlement to input VAT recovery unless the underlying counter-party is located outside the UK  

• Intermediary Services provided to a non UK client = Outside the Scope with Input VAT entitlement.

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-Contains public sector information licensed under the Open Government Licence v3.0.

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