Financial firms face tax bill on outsourcing arrangements Banks, insurance companies and other financial services providers who outsource administrative functions abroad could be hit by changes to the VAT rules coming into force on 1st January 2010. Under current rules, where services are provided by one business to another, the place of supply for VAT purposes is generally deemed to …
This game has always struck me as a tax avoidance scheme, now somebody has finally closed the loophole.
The problem being of course that the damage has already been done to the UK jobs market. Any company that's outsourced all these services offshore is going to have to work out which is cheaper, to bring it all back in house or to pay the VAT. I'll bet it would take a few years to break even. So existing jobs will probably stay offshore, only the new ones will be in house.
Yet HMRC and this government dont like that and want avoidance to become as bad (i.e. illegal) as evasion is.
Now they are redefining the english language to call the place of receipt the place of supply.
This is simply a desparate tax grab at business to avoid having to announce unpopular new taxes.
Other posters here seem to think that it will bring jobs back to the UK, i would argue that it will push firms to put more of their business outside fo the EU... e.g. if India supplies backoffice to a division of a bank, then why shouldn' t the bank further outsource the recipient to avoid the tax further.
next step is to bill the companies the VAT in full for the outsourced work.
the beancounters are really gonna squirm then.
they already are faced with customer backlash regarding the utter hatrid of having to deal with Djames on the telephone in bangalot!
the sooner they wake up to the fact that we would rather deal with someone in a Glaswegian call center to an overseas subcontinent one the better.
(sorry not meaning to be rude or offfensive to the scotts in any way - more a reference to glaswegian translators needed for international conferences in the media in the last few days, and having know some who when they get into full local dialect, its utterly unintelligible, russian would be easier, at least it would be more consistant)
so, the sooner all them bums on seats are brought back to the uk, the better the it.uk industry will be, cos they all need support.... in one way or another...
beancounters=muppets!
Will this push jobs back to the UK? Maybe. It depends.
The key issue is that if they outsource 'back office' functions to a different country, then they will be responsible for the vat on those services.
Using an example of a company outsourcing back office functions to India where the salaries are a fraction of their UK employees, the company would now be liable for VAT on those services.
Note that this is outsourcing. I don't think it deals with a global corp with operations in multiple countries.
So that deal where some company outsources a function to IBM who uses resources in India, there will no longer be tax savings. The company or IBM will now face the VAT.
Will this bring jobs back to the UK? It depends on the cost of labor in the other country and the amount of the VAT. If the cost savings don't justify the head aches, then the jobs will be done locally.
So many jobs these days can be done remotely that if outsourcing continues the only jobs that will be left in Western Europe, North America, Australia, Japan, and South Korea will be hands work. Of course, at that point noone will be able to afford to pay for those services anyway. I hope many you have enough land for subsistance farming.
The populations of India and China are I have no doubt large enough to do any work remotely that can be done remotely.
Tough times ahead for most other countries.
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