The government will not implement a recent EU ruling on the taxation of outsourced activities until after a consultation process has taken place.
Customs has published its response to the European Court judgment on insurance outsourcing.
It said that it would implement the judgment but added that there would be no changes to VAT policy until after a formal consultation process had been completed.
This will lead to VAT becoming chargeable on many of the outsourced services currently provided to insurers.
Customs' response said: “Her Majesty's Revenue and Customs are currently meeting insurance industry representative bodies and providers of the affected services to discuss the impact of this judgment.
“Following these preliminary discussions, there will be a 12-week formal consultation period on how the judgment is to be implemented in the UK, the proposed changes to UK legislation and the impact implementation will have on the affected industries.”
A consultation paper will be published in July.
Professional services firm KPMG predicted that there is unlikely to be a change to VAT law before 1 January 2006.
It added that there could be “scope to delay the implementation beyond that date”.
