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.
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