Feeds

EU closes AOL UK VAT loophole (but not yet)

HM Custom states its case

  • alert
  • submit to reddit

The essential guide to IT transformation

AOL will have to start charging UK customers VAT - from July 1, 2003, bringing it into line with British ISP rivals.

The change follows a policy review conducted by HM Customs & Excise, the British government arm responsible for VAT ruling and collection.

Currently, AOL UK is treated as a content provider domiciled outside the European Union, and therefore not subject to VAT, unlike UK competitors, which are treated as telecoms providers (and therefore subject to VAT). This ruling is estimated by Freeserve, the UK's biggest ISP, to save AOL £30m a year, and gives its rival a huge unfair competitive advantage.

In a Business Brief, published on March 14, HM Customs largely appears to endorse this viewpoint. But the authority argues that "differences in the current VAT treatment of such packages are a direct function of existing EC provisions, which fail specifically to cover packages of Internet service and content.

"A lasting, fair and clear approach, whereby all Internet service packages supplied by UK and non-EC ISPs are taxed in a similar way can only, in Customs' view, be successfully achieved through material
changes to the relevant EC VAT rules."

Such a change is underway with changes on treatment of VAT contained in the EU's new e-commerce directive, HM Customs says. This will see the determination of VAT charging on certain services - "including digitalised products, and so content provision" - move from reference to the location of the supplier to reference to the location of the consumer. The upshot is that the ecommerce directive, a very controversial ruling - especially with the US government and US-domiciled online retailers, catches AOL UK on the content provision front.

So what now? There will be a level playing field for all ISPs operating in the UK, but only from July 1, 2003. Will this note be enough to fend off legal action from Freeserve, which has applied for a judicial review of HM Customs' treatment of AOL? Considering that AOL will stand to profit to the tune of £40m until the ecommerce directive comes into force, we suspect that Freeserve will continue to argue its case in court that HM Customs is wrong. ®

5 things you didn’t know about cloud backup

More from The Register

next story
Microsoft exits climate denier lobby group
ALEC will have to do without Redmond, it seems
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Barnes & Noble: Swallow a Samsung Nook tablet, please ... pretty please
Novelslab finally on sale with ($199 - $20) price tag
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
7 Elements of Radically Simple OS Migration
Avoid the typical headaches of OS migration during your next project by learning about 7 elements of radically simple OS migration.
BYOD's dark side: Data protection
An endpoint data protection solution that adds value to the user and the organization so it can protect itself from data loss as well as leverage corporate data.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?