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Financial Services

December 19, 2006

Question written on 19/12/2006

To ask the Chancellor of the Exchequer what assessment he has made of the impact on (a) inward investment to and (b) the competitiveness of the City of London of HM Revenue and Customs’ policy change in July 2006 to withdraw the right of claimants from outside the European Union in the financial services and insurance sectors engaged in the supply of services to non-EU customers to recover VAT incurred on goods and services from UK suppliers.

Answered by Dawn Primarolo

The change in the law, which was announced at the 2004 pre-Budget report and came into effect on 3 December 2004, was implemented as a result of a judgment of the Court of Appeal in connection with the EC 13th VAT directive, which enables VAT to be recovered by non-EU businesses in certain circumstances. No further changes to the law were made in July 2006.In order to minimise the risk of forestalling no pre-announcement of this change was made, and no impact assessments have been made.