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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].

1 Introduction

1.1 Background

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