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Preventing VAT avoidance through ‘offshore looping’

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HM Treasury has published a draft order to block VAT avoidance schemes of the type defended successfully at the First-tier Tribunal in Hastings Insurance Services [2018] UKFTT 27 (TC), involving recovery of VAT on exempt financial services which are routed through offshore entities outside the EU, then ‘looped’ back as supplies made to consumers in the UK.

The draft Value Added Tax (Input Tax) (Specified Supplies) (Amendment) Order 2018 excludes intermediary services from the otherwise exempt supplies in respect of which insurers can recover input tax when those supplies are made outside the EU. This is to ensure that VAT recovery is available only where the final consumers of the supplies are outside the UK. See

While these schemes are used mainly by insurers, the financial secretary to the Treasury said in a written statement that the government is also considering ‘additional measures to protect further tax from being lost on variations of these schemes, which could be adopted extensively across the VAT exempt sectors’.

Issue: 1409
Categories: News , Indirect taxes , VAT