Introduction
The preference for internal development and service provision in the financial services sector has been encouraged by the VAT-exempt status afforded the sector. Banks and insurers cannot charge on their VAT expenses and incur the full cost of the charge. Whilst a number of options are available to reduce this imbalance, the situation could get worse following a European Court of Justice ruling.

Report Highlights
Addressing the imbalance created by the exemption system, is, however, not as simple as first thought. On the one hand, introducing VAT on mortgage interest, for example, would be controversial in the extreme. On the other hand, the UK traditionally has no charge for current account banking facilities, complicating VAT charging further.

Under the Accenture ruling, the actual processes that will qualify for VAT exemption appear to be client relationship ownership and sales/ revenue generation oriented. Crucially it does not appear that all back office financial services processes will be included.

Introducing VAT on BPO services in the financial services sector could have significant repercussions for growth in these service segments. The inevitable implication for BPO services will be an increase in cost, unless the processes and relationships can be redesigned to match more closely the VAT exemption requirements of the tax authorities.

Scope
Analyses the key issues around VAT exemption in the financial services outsourcing sector

Covers the implications surrounding the potential end of BPO VAT exemption

Reasons to Purchase
Gain a competitive advantage through the detailed knowledge of tax in European FS outsourcing.

Use Datamonitor's timely and concise analysis of key business and technology issues to develop a compelling go-to-market strategy.

Introduction
The preference for internal development and service provision in the financial services sector has been encouraged by the VAT-exempt status afforded the sector. Banks and insurers cannot charge on their VAT expenses and incur the full cost of the charge. Whilst a number of options are available to reduce this imbalance, the situation could get worse following a European Court of Justice ruling.

Report Highlights
Addressing the imbalance created by the exemption system, is, however, not as simple as first thought. On the one hand, introducing VAT on mortgage interest, for example, would be controversial in the extreme. On the other hand, the UK traditionally has no charge for current account banking facilities, complicating VAT charging further.

Under the Accenture ruling, the actual processes that will qualify for VAT exemption appear to be client relationship ownership and sales/ revenue generation oriented. Crucially it does not appear that all back office financial services processes will be included.

Introducing VAT on BPO services in the financial services sector could have significant repercussions for growth in these service segments. The inevitable implication for BPO services will be an increase in cost, unless the processes and relationships can be redesigned to match more closely the VAT exemption requirements of the tax authorities.

Scope
Analyses the key issues around VAT exemption in the financial services outsourcing sector

Covers the implications surrounding the potential end of BPO VAT exemption

Reasons to Purchase
Gain a competitive advantage through the detailed knowledge of tax in European FS outsourcing.

Use Datamonitor's timely and concise analysis of key business and technology issues to develop a compelling go-to-market strategy.