New VAT powers threat

New VAT powers threat

Customs' desire to break up VAT groups could cost firms millions. Chris Quick reports

Customs & Excise wants sweeping new powers to break up VAT groups, which tax experts warn could cost companies millions and create huge commercial uncertainty, it emerged this week.

Customs signalled its desire for new powers to vary the composition of VAT groups in meetings during October with taxpayers and advisers.

The meetings centred on the controversial proposal, which was announced earlier this year, to ban VAT groups for banks and insurers which, according to those who attended the meetings, Customs now wants to drop in the face of overwhelming opposition.

This news will come as a relief to banks and insurers, which face massive restructuring costs if their right to form VAT groups is stopped.

However, tax experts who attended the meetings warn Customs is now seeking new powers over the formation and membership of VAT groups, which could hit VAT groups in all sectors.

Peter Jenkins, VAT partner at Ernst and Young, said: ‘Insurance and banks will be relieved Customs is listening to the overwhelming weight of objections about what was an ill-thought-out proposal. But they will be extremely concerned at the alternatives Customs is considering.

In particular, increases in its powers to vary composition of existing groups for the protection of revenue, if they go through, could create great uncertainty in commercial transactions and deals.’

Martin Sharrat, VAT partner at Arthur Andersen, said: ‘In the face of massive opposition I would be amazed if it goes ahead with its main proposal to restrict VAT grouping rights for banks and insurers. But it has gathered a lot of information in the consultation process and it is likely to use it to tighten up on procedures.’

Any decision by Customs to drop its main proposal will be well received by insurers and banks. Barclays deputy tax director, Kevin McCormick, said: ‘We would be very pleased if the main proposal was dropped.’

Related Articles

Supreme Court rules against Pimlico Plumbers in landmark employment case

Legal Supreme Court rules against Pimlico Plumbers in landmark employment case

1m Alia Shoaib, Reporter
Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

2m Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

4m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

5m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

7m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

8m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

9m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

9m Emma Rawson, ATT Technical Officer