VATFIN2280 - Money (including transfer of money) and related services: interpreting item 1: what is meant by 鈥榙ealing with鈥�
It is important to note that the law refers to dealing 鈥榳ith鈥� and not dealing 鈥榠n鈥� money. In the case of Williams & Glyn鈥檚 Bank Ltd (Tribunal decision 118) - see VATFIN2410 - the tribunal noted that these words, in the context of the purpose of Group 5, 鈥樷€� require the relevant services to have sufficient of the characteristics of a financial transaction or operation so as to be capable of being fairly so described.鈥� A financial institution does not, for example 鈥榙eal in鈥� guarantees.
Therefore, you need to distinguish between money (and other financial instruments) being dealt 鈥榠n鈥� as physical goods (for example, a numismatic dealer or a security company stocking up ATMs) and money being dealt 鈥榳ith鈥� as a service (for example, a bank鈥檚 over-the-counter foreign exchange service). The latter naturally falls within the exemption as financial in nature.
To deal with money as required under item 1, the business supplying the services will act as a principal, as in the foreign exchange example above. (Foreign exchange is further discussed in VATFIN2700).