Commentary

V6.126 VAT recovery and other practical points in the banking and financial sectors

Part V6 Business by business

V6.126 VAT recovery and other practical points in the banking and financial sectors

V6.126 VAT recovery and other practical points in the banking and financial sectors

This paragraph considers VAT recovery and other practical points in the banking and financial sectors. For the liability of supplies in the banking and financial sectors, see V6.125.

VAT recovery in the banking and financial sectors

VAT recovery is an important consideration for businesses providing financial services. To the extent that such businesses have exclusively exempt activities they will be unable to recover VAT.

However, many providers of financial services make supplies which are subject to VAT at the standard or zero rates and hence afford some entitlement to VAT recovery on costs. For the liability of supplies in the sectors, see V6.125.

In addition, many providers of financial services make 'specified supplies' (see below) which also give rise to a VAT recovery entitlement.

As a result a great number of providers of financial services will be partly exempt and able to recover a proportion of the VAT they incur on their costs.

Specified supplies in the banking and financial sectors

Under SI 1999/3121 businesses have an entitlement to recover VAT attributable to certain 'specified supplies' which fall within the exemption for financial services (and related services) where they are either made to customers who belong outside the EU or where they are directly linked to the export of goods outside the EU. VAT recovery can also extend to costs used for certain intermediary services in relation to such transactions. This is important for the sector and makes identifying

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial