§ Mr. CashTo ask the Chancellor of the Exchequer what assessment he has made of the effect of the European Court of Justice Ruling (C172/96) on the UK financial services industry; what estimate he has made of the cost of the ruling to HM Customs and Excise; and if he will make a statement. [68816]
§ Dawn PrimaroloThe European Court of Justice ruled (C172/96) on 14 July 1998 that foreign exchange (forex) transactions are supplies for VAT purposes. This ruling will effect the extent to which financial institutions will be able to recover VAT on purchases relating to these transactions. In some cases, it will reduce the amount of VAT recoverable, but for those UK financial institutions with a wide range of non-EU, international customers it should increase the amount of recoverable tax. This is because these institutions will now be able to recover the VAT on forex transactions supplied to persons outside the EU where they were not previously able to do so. Some of these same institutions may also benefit if they apply the ruling to forex transactions which were made before 14 July 1998. The ECJ ruling will have no significant effect on the costs of HM Customs and Excise.