The Budget contains a number of announcements which relate to VAT and financial services.
The government will undertake a review of the UK’s funds regime during 2020, beginning with a consultation, including consideration of the VAT treatment of funds following on from the recent changes to the fund management exemption.
An industry working group is to be established to review how financial services are treated for VAT purposes.
Also there will be further engagement around the consultation on partial exemption, and on the recent call for evidence on IPT, with a further consultation on reforming the operation of IPT.
The changes are relevant to financial services businesses. Some are of specific interest to fund managers and insurers, but the working group may cover issues which are important to the entire sector.
The extension of the exemption for fund management is effective from 1 April 2020, although no dates have been provided for the wider review of VAT and funds.
No dates have been set for HMRC’s responses to the consultations on partial exemption and IPT, nor for the formation of the working group on financial services.
Given the potential impact of the UK’s withdrawal from the EU on the financial services sector, HMRC’s engagement on a variety of indirect tax issues is welcome.