On 19 July 2018, HMRC published a consultation on draft legislation intended to address VAT avoidance via offshore looping, predominantly in the insurance sector.
Financial services providers are unable to reclaim VAT incurred on their costs as financial and insurance services are VAT exempt if supplied within the EU. This leads to companies forming arrangements with non-EU companies to export and resupply, or loop, those services back to UK consumers to reclaim the VAT incurred.
HMRC intends to prevent looping by restricting the application of Article 3 of the Value Added Tax (Input Tax) (Specified Supplies) Order 1999, to circumstances where the final consumer is not in the UK.
A copy of the explanatory memorandum can be viewed here.