29 November 2007
The EU has announced plans to simplify VAT taken from financial services including car insurance.
Originally proposed by the European Banking Federation (EBF) and adopted by the European Commission yesterday, the plans would see more insurers and banks charged VAT.
Previously, the firms were specifically exempt from charging the tax for customers - although ambiguities have developed over the extent of the exemption since it was first introduced in the 1970s.
Under the proposals, therefore, the exemption would be very clearly defined - and insurers and banks would then be given the option to impose the taxes if they wished.
Guido Ravoet, Secretary General of the EBF, commented: "[The federation] considers the proposal…to be a first step in the right direction and will continue to work with the Commission in addressing the technical issues that are apparent in the proposal."
The plans were welcomed by the Association of British Insurers, with Assistant Director of Financial Regulation and Taxation, Sarah Knight, saying that insurance firms would "benefit" from them.
"The changes will increase clarity, allowing firms to operate and plan more efficiently," she added.
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