Target Group Ltd v HMRC — Supreme Court VAT Exemption Ruling
Summary
Target Group Ltd, a provider of outsourced loan administration services, appealed to the UK Supreme Court the question of whether its services are standard-rated supplies for VAT purposes or fall under the financial services exemption under article 135(1)(d) of the Principal VAT Directive, as implemented in the Value Added Tax Act 1994. The Supreme Court panel of five justices heard the appeal on 12-13 July 2023. This decision concludes Target's multi-year challenge following unsuccessful appeals at the First Tier Tribunal, Upper Tribunal, and Court of Appeal. Financial services firms providing outsourced administration or similar back-office services to lenders should review whether their operations satisfy the article 135(1)(d) exemption conditions.
“Whether outsourced loan administration services supplied by Target are standard rated supplies for VAT purposes, or if they fall under the "financial services exemption" under article 135(1)(d) of the Principal VAT Directive, implemented in the Value Added Tax Act 1994?”
Firms providing outsourced loan administration, debt collection, or similar back-office services to financial institutions should review whether their services are correctly treated for VAT. The Supreme Court's interpretation of article 135(1)(d) means that activities at the periphery of financial services may not qualify for the exemption. Businesses that have treated such services as exempt should consider whether a voluntary disclosure to HMRC is warranted.
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What changed
The UK Supreme Court delivered its judgment in Target Group Ltd v HMRC on 11 October 2023, resolving whether outsourced loan administration services qualify for the financial services VAT exemption under article 135(1)(d) of the Principal VAT Directive. The Court upheld the decisions of the First Tier Tribunal, Upper Tribunal, and Court of Appeal that Target's services were standard-rated for VAT purposes and not exempt. Target had sought a Non-Statutory Clearance from HMRC in May 2015, and after HMRC's initial ruling was upheld on internal review, Target pursued the matter through four levels of the UK court system over several years.\n\nFinancial services firms that provide outsourced loan administration, back-office processing, or similar services to lenders should note the Supreme Court's interpretation of article 135(1)(d). The decision confirms that services of this nature do not automatically qualify for the financial services exemption and may be subject to standard-rate VAT. Businesses that have relied on a different VAT treatment for such services should seek updated advice. The ruling represents the final resolution of this specific dispute and sets authoritative precedent for the interpretation of the exemption scope under the Principal VAT Directive as transposed into UK law.
Archived snapshot
Apr 24, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
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TAX
Target Group Ltd (Appellant) v Commissioners for His Majesty's Revenue and Customs (Respondent)
Judgment given
Contents
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Case summary
Case ID
UKSC/2021/0189
Parties
Appellant(s)
Target Group Ltd
Respondent(s)
Commissioners for His Majesty's Revenue and Customs
Issue
Whether outsourced loan administration services supplied by Target are standard rated supplies for VAT purposes, or if they fall under the "financial services exemption" under article 135(1)(d) of the Principal VAT Directive, implemented in the Value Added Tax Act 1994?
Facts
Target provides outsourced loan administration services to customers. In May 2015, Target sought a Non-Statutory Clearance from HMRC concerning its VAT liability in respect of these services, contending that they are exempt from VAT. HMRC responded with a letter setting out its position that Target's services were vatable. Target requested a review of that decision, which HMRC upheld upon review.
Target appealed to the First Tier Tribunal, which was unsuccessful. The Upper Tribunal also held that these services were vatable. Target appealed to the Court of Appeal, which confirmed the decision of the Upper Tribunal. Target now appeals to the Supreme Court.
Date of issue
14 September 2021
Judgment appealed
[2021] EWCA Civ 1043 HTML
Judgment details
Judgment date
11 October 2023
Neutral citation
[2023] UKSC 35
Judgment links
PDF | 378.82 KB
11 October 2023 PDF Press summary (PDF)
PDF | 288.86 KB
11 October 2023 Judgment on The National Archives (HTML version) HTML
Press summary on The National Archives (HTML Version) HTML
Judgment on BAILII (HTML version) HTML
Judgment summary
11 October 2023
Appeal
Justices
Hearing dates
Full hearing
Start date
12 July 2023
End date
13 July 2023
Watch hearings
12 July 2023 - Morning session
12 July 2023 - Afternoon session
13 July 2023 - Morning session
13 July 2023 - Afternoon session
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Change log
Last updated 16 April 2024
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