Very interesting article from E&Y re the potential impact of VAT on the provision of "Fintech Services" to financial institutions.
In simple terms, Banks cant recover VAT in most Fintech Service scenarios, therefore Fintreckers who want to provide Fintech Services to Banks need to structure their service delivery in a manner which allows the Fintech Service to be treated as being VAT exempt- Not easy.
Any Fintrecker who wants to live long and prosper with the Banks needs expert advice on this issue- and we have over 18 years experience in this area.
Come and talk to us before the VATman takes an interest in what you are actually doing (not just what your service contract says you are doing).
In the words of Mr Spock- "Insufficient facts always invite danger"!
The qualification of the services supplied by fintechs is vital in determining the VAT liability to be attributed to those services. This distinction is far from academic. Where fintechs are competing with traditional financial service providers (for example, for processing payments), the ability to recover VAT on costs can be the differentiator in determining commercial success. Traditionally, the supply of financial services results in a VAT burden in the hands of the financial services provider because its services fall within an exemption from VAT with no, or limited, right to deduct the VAT on associated costs. If the fintech is supplying its services to a bank or to a private individual, ideally its services will also fall within the scope of an exemption, thereby reducing the VAT burden on its customer.