The Government has announced a major change in the treatment of VAT in the event of a no deal Brexit.
At the moment, supplies of certain financial and insurance services are VAT exempt, with no right to input tax recovery if they are supplied to customers in the UK or EU.
The original Statutory Instrument (“SI”) laid before Parliament on 5 February 2019 maintained the status quo by stating that supplies to the EU27 and the UK would be exempt with no right to input tax recovery.
However, “The Value Added Tax (Input Tax) (Specified Supplies) (EU Exit) (no.2) Regulations (SI 2019/408)” changes this. This new SI will mean that there is a right to input tax recovery for the specified supplies made to any customer outside the UK. This would increase the VAT recovery position of many financial service providers where the customer base is outside the UK.
The specified supplies are supplies of services by intermediaries in the insurance and financial services sectors and supplies of insurance and financial services that are covered by the exemption in the UK (Credit, banking, dealing in shares and financial instruments certain pension schemes etc.)
For help and advice speak to our VAT contacts:
Ruth Corkin, VAT and indirect tax advisory
Natasha Heron, VAT Manager