UK Finance response to the Simplification of Partial Exemption & Capital Goods Scheme Call for evidence

As HMRC will be aware, UK Finance's members have a particular interest in this call for evidence, given that banks and other financial institutions make a mixture of exempt and taxable supplies for VAT purposes and are required to charge VAT, and recover input VAT, on their services accordingly. In practice this is a complex and time-consuming process. For instance, under the Partial Exemption Special Method (PESM) regime, UK Finance members report facing significant uncertainty regarding their VAT recovery position and spend considerable time and resource in getting their PESM agreed with HMRC. For some, the process has taken a number of years, meaning having to file VAT returns on a ?provisional? basis, with risk of challenge continuing for an indefinite period.