European Court of Justice on Skandia America Corp ("SAC") will add substantial costs to financial services businesses

Gary Campbell, tax partner at Deloitte, said: “The CJEU judgement in Skandia America Corp (“SAC”) is a major decision that impacts a large range of financial services businesses that operate branch structures – including banks and insurers.  As a direct result of this judgment, VAT may need to be charged on supplies and cost allocations between head office and branch entities (where it was not previously).  The value of these supplies and allocations is often substantial and therefore could involve material amounts of VAT.  As many financial services businesses are unable to recover all of the VAT they incur, this will lead to greater amounts of irrecoverable VAT and will represent an additional cost to businesses.”

ENDS

Notes to editors

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