Financially Tainted -

The much criticised Value Added Tax (Finance) Order 1999 was introduced by Customs specifically to roll back some actual and anticipated defeats in litigation and was meant to align Group 5 of Schedule 9 to the VAT Act 1994 more closely with the underlying provision in Article 13B(d)(1) to (6) of the Sixth Directive. Despite widespread criticism and a growing recognition even in the department that neither objective has been achieved Customs have defended the Order stoutly as have Treasury Ministers and attempts to mitigate its effect on financial services' outsourcing in line with Recommendation 18 of the Cruickshank Report on Competition in United Kingdom Banking have not met with success.

This report had suggested that VAT acted as a penalty on those banks which sought efficiencies and economies of scale through outsourcing solutions and that VAT policy in this...