V16.853 Financial exemptions—changes brought about by the 1999 Finance Order
VAT Information Sheet 10/99, August 1999
The VAT (Finance) Order, SI 1999/594 introduced several changes to the financial exemptions in VATA 1994 Sch 9 Group 5 with effect from 10 March 1999. This Information Sheet details the background to the changes and the likely effects. The full text of the new law is set out in the Annex [not reproduced].
It is settled law that exemptions are exceptions to the general principle that VAT is levied on all business transactions, and as such, exemptions are to be interpreted strictly. However, recent legal challenges in the UK stretched the boundaries of exemption beyond that originally intended and beyond that which is, in our opinion, permissible in European law. The changes in the 1999 Finance Order reinstate the position immediately before those legal challenges. They do not extend taxation beyond that. They clarify the existing exemptions for financial services and provide more detailed definitions of what the exemption does, and does not include. The changes were made following extensive consultation with VAT authorities in other European member states and with the European Commission.
If you have specific examples of contracts where you believe that the amendments will impact beyond the effects intended, please let us have details.
1.2 European Court of Justice judgment
In European law, the exemptions for financial services are in the Sixth Directive, art 13B(d). The only European Court of Justice (ECJ) judgment on the scope of these exemptions is Sparekassernes Datacenter