A 1999 VAT Tribunal ruled that services provided by credit card processing company FDR were exempt from VAT after Customs ruled in 1995 that the tax was payable.
But in an embarrasing move for Customs, the Court of Appeal today upheld the Tribunal’s ruling saying FDR did not have to pay the tax.
Estimates indicate FDR alone could save £70m – a sum it risked having to pay to Customs if the decision had gone the other way.
Marc Welby, VAT partner at Ernst & Young, advisers to FDR, said: ‘We are delighted with the result.
‘It is tremendous news for our client FDR, and this decision will also be very welcome to those financial services businesses who outsource services relating to credit, loan and hire-purchase agreements.’
It is understood Customs will now have to review a finance order placed in the 1999 Budget which made the services laible to VAT.
Customs has indicated it is considering a further appeal to the House of Lords.
Report argues that the government must change the way it makes tax and budget decisions
Drastically fewer offices for HMRC in the hope to reduce their running costs
Tayabali Tomlin and d&t directors launch £20 a month TaxGo service, aiming to be the 'biggest UK firm' by client numbers
Companies must report on their complex financial structures including offshore accounts and notify HMRC