Europe to rule on VAT powers

Powers to shut down VAT arrangements thought to be undertaken soley for the
purposes of tax avoidance could be won by HM Revenue & Customs.

The European Court of Justice is due to deliver its verdict in the Halifax
case on Tuesday 21 February. The case concerns a complex series of structures
that the bank set up, which HMRC regarded as nothing more than a scheme to avoid
tax.

The ECJ is set to rule on whether or not such structures are invalid purely
on the basis that they are in place solely for avoidance purposes, effectively
instituting a general anti-avoidance principle in UK law.

The advocate general advised against such an argument last year when fixing
an opinion in the case.

But the opinion also left open a separate issue as to whether or not, since
Halifax was claiming a right to get tax back, it could do so since its behaviour
seemed to abuse the principles underlying those rights.

HMRC is set to push any favourable judgment as far as possible. Director
general Dave Hartnett told Accountancy Age in October that: ‘We will be
looking at the potential scope of using abuse of law arguments if the court
confirms the view of the advocate general.’