The decision, against Halifax, the former building society, related to Pounds 7m of VAT paid on the building of call centres which it attempted to construct by setting up intermediary companies which would have separate VAT registrations.
The companies would have been able to claim back very much more VAT than if Halifax had directly contracted builders.
However Customs believes the decision, from the London Tribunal Centre, has set a precedent and will rule out many tax strategies in the future if they are designed ‘purely for the avoidance of VAT’.
Peter Jenkins, head of indirect taxes at Ernst & Young, who advised on the original transactions for Halifax, said: ‘The journey has only started, it hasn’t finished and this is the first of many skirmishes along the way. It will undoutedly go to the higher courts.’
But he predicted that though the ruling may indeed set a precedent it could not rule out all VAT avoidance strategies and would in time be ‘whittled down’.
Halifax said it was ‘surprised and disappointed’ but was still considering whether or not to make an appeal at the High Court.
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