Taxation - Customs VAT plans 'flawed'

New European VAT rules could eclipse Customs & Excise plans to get tough on VAT grouping, tax advisers and professional bodies warned this week.

ACCA described Customs’ plan to raise an extra #400m annually by imposing VAT on transactions between company subsidiaries as ‘hopelessly flawed’.

It warned: ‘The idea needs a complete rethink, especially since we know that new European proposals on VAT grouping are on their way.

‘If the UK goes ahead with its own proposals, it could be a worst case of change and then change yet again.’

The Chartered Institute of Taxation also criticised the proposals, describing them as ‘hopelessly unrealistic’. A spokesman said: ‘These proposals will provoke unnecessary upheavals in the nation’s business structure, will increase costs and will ultimately fail to achieve anything like the #400m savings forecast.’

A Customs spokeswoman said no decisions had been taken on whether or not its proposals would be introduced. ‘One of our main concerns was to let the business world look at the proposals,’ she added.

The proposals also came under fire for the uncertainty they would create.

Describing the consultative document as ‘the lion that miaowed’, law firm Simmons & Simmons said it was not much more that a list of problems with a GAAR.

Edward Troup, head of tax strategy, said: ‘Tax avoidance is the proverbial elephant. You know what it looks like but you can’t describe it. This document has much discussion of administrative rules, but virtually none on what avoidance means.’