In Dollar Financial v HMRC [2016] UKFTT 598 (19 August 2016), the FTT found that a website generating leads to a lender was an intermediary for the purpose of the principal VAT Directive art 135.
Dollar Financial made small, short term loans to private individuals, often referred to as payday loans, as customers looked for loans to tide them over until the next pay day. Dollar Financial had accounted for VAT on supplies by overseas suppliers under the reverse charge. There were two categories of suppliers: ‘lead generators’, who managed websites on which potential borrowers applied for loans; and customer services providers, who offered new loans, ‘conversions’ and ‘live chat’.
A ‘conversion’ was a phone call to an applicant who had been offered a loan, the purpose of which was to convince the applicant to take the loan. Live chats were similarly used to convince customers while they were browsing the website. The issue was whether those activities were exempt as those of intermediaries.
The FTT found that supplies by lead generators were exempt. Rejecting HMRC’s argument that for the exemption to apply, a legal relationship had to exist between lead generators and customers, the FTT considered that the legal relationship between lead generators and Dollar Financial was sufficient. Similarly, the fact that lead generators assessed borrowers (before referring them to Dollar Financial) was sufficient; it did not have to assess the lender as well. As for conversions and live chats, they constituted neither an introduction nor the negotiation of terms and therefore did not fall within the intermediary exemption.
Why it matters: The FTT said: ‘I consider that the leadgens (lead generators) did enough to cross the line from being a mere conduit or advertiser into being intermediaries introducing the sort of person to whom the appellant might lend the sort of credit s/he was looking for. To my mind that is within the exemption of “negotiation of credit”.’
In Dollar Financial v HMRC [2016] UKFTT 598 (19 August 2016), the FTT found that a website generating leads to a lender was an intermediary for the purpose of the principal VAT Directive art 135.
Dollar Financial made small, short term loans to private individuals, often referred to as payday loans, as customers looked for loans to tide them over until the next pay day. Dollar Financial had accounted for VAT on supplies by overseas suppliers under the reverse charge. There were two categories of suppliers: ‘lead generators’, who managed websites on which potential borrowers applied for loans; and customer services providers, who offered new loans, ‘conversions’ and ‘live chat’.
A ‘conversion’ was a phone call to an applicant who had been offered a loan, the purpose of which was to convince the applicant to take the loan. Live chats were similarly used to convince customers while they were browsing the website. The issue was whether those activities were exempt as those of intermediaries.
The FTT found that supplies by lead generators were exempt. Rejecting HMRC’s argument that for the exemption to apply, a legal relationship had to exist between lead generators and customers, the FTT considered that the legal relationship between lead generators and Dollar Financial was sufficient. Similarly, the fact that lead generators assessed borrowers (before referring them to Dollar Financial) was sufficient; it did not have to assess the lender as well. As for conversions and live chats, they constituted neither an introduction nor the negotiation of terms and therefore did not fall within the intermediary exemption.
Why it matters: The FTT said: ‘I consider that the leadgens (lead generators) did enough to cross the line from being a mere conduit or advertiser into being intermediaries introducing the sort of person to whom the appellant might lend the sort of credit s/he was looking for. To my mind that is within the exemption of “negotiation of credit”.’
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