Government wins Halifax VAT case

Government wins Halifax VAT case

Court rules in taxman's favour, but does not go as far as it could have done in setting up general anti-avoidance rule

The government has won its battle with Halifax over abusive VAT arrangements,
winning the right to deny the bank a VAT repayment on the grounds that the
structure it put in place to do so was abusive.

The ECJ ruled in favour of the taxman this morning, potentially giving the UK
tax authorities new powers to tackle what it perceives to be abusive tax
arrangements.

‘The Sixth VAT directive does not grant a taxable person the right to deduct
input VAT where the transactions from which that right derives constitute an
abusive practice,’ the court’s press release says.

The government lost on another point, however. The court ruled that the fact
a company was trying to avoid tax did not constitute a sufficient reason for the
government to rule out the arrangements. But that did not mean companies could
abuse a right they were given.

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