Tax recovery service Meridian is challenging a new United Kingdom tax administration policy blocking value-added tax reclaim applications from the financial services and insurance sectors outside of the European Union. Such companies now are beginning to see their VAT filings rejected by customs officials, said Les Baer, Meridian's North American president.
"We believe this is not consistent with what they're trying to do in the U.K. in making London the financial capital of the world," Baer said. "We've met with customs and are discussing review and reversal of the policy."
Meridian is encouraging businesses in the sector to continue to file for VAT recovery as it challenges the policy. Besides meeting with Her Majesty's Revenue and Customs officials, the service also is lodging legal remedies for its affected clients.
The change will increase costs to non-EU financial services businesses up to 17.5 percent, the standard U.K. VAT rate, according to Meridian. Baer questioned HRMC's interpretation of the EU directive, designed to prevent VAT fraud, which the agency is using to reject the filings.
"The blocking mechanism is not provided by European law," he said. "It allows U.K. authorities to block certain expenditures but not certain types of claimants."
The policy follows a fee recently added by the U.S. Internal Revenue Service on companies filing for VAT recovery on foreign purchases
(BTN, Oct. 23). The fee, which took effect on Nov. 1, requires companies to pay up to $50 to file the form that attests U.S. residency and allows for VAT filings.