Last week the ISP filed for a judicial review of a Customs policy that allows AOL to avoid paying VAT – a policy that dates back to October 1997.
At the time Customs ruled that internet companies based outside the EU would be treated as content providers and not charged VAT, unlike telecoms-services groups.
But Customs ruled Freeserve, which did not exist at the time of the original ruling, would be treated as a telecoms provider, and charged VAT at 17.5%.
Freeserve has argued that Customs should not make any distinction between the two companies as they both offer access to the internet as well as news and other content.
BT Openworld is said to have a similar problem though is not involved with the Freeserve action.
Freeserve hopes the review will be heard in a month’s time.
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