Financial services stand to gain from the 2% tax cut
The British government’s tax cuts will help the financial services industry, said a tax specialist.
Chancellor Alistair Darling cut VAT from 17.5% to 15% in his pre-Budget report.
The cut comes into effect on Monday (December 1) until 2010, when it is expected to return to current levels.
David Bearman, VAT partner specialising in financial services at Ernst & Young, said: ‘The reduction in the VAT rate announced today is to be welcomed and will provide some relief for the financial services industry.’
He added: ‘A big winner will be the retail banks and insurers, both of which can recover little or none of the VAT they incur on their costs, thus the rate reduction decreases their external costs of broadly 2%. The impact for investment banks and commercial insurers is likely to be lower in the region of a 1% to 1.5% reduction on their external costs.’
‘The industry will currently be budgeting for external expenditure for 2009 and this measure will have released some pressure on those budgets but I doubt it will have significantly altered the trend to reduce spending.’
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