Feeds

EU closes AOL UK VAT loophole (but not yet)

HM Custom states its case

  • alert
  • submit to reddit

High performance access to file storage

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. ®

High performance access to file storage

More from The Register

next story
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
HP ArcSight ESM solution helps Finansbank
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.