Out-Law / Your Daily Need-To-Know

Freeserve demands urgent VAT Directive action in the UK

20 Dec 2001, 12:00 am

Freeserve, the UK’s largest ISP, today called on the UK government to urgently implement into domestic law the new European proposal to regulate VAT on digital supplies. Doing so would solve the company’s much-publicised concerns that US-based rival AOL is at an unfair advantage under current VAT rules.

The new Directive will mean that AOL in the UK will have to charge its unmetered access customers VAT at 17.5%. It is presently exempt. The proposed Directive, agreed recently by the Council of Economics and Finance Ministers of the EU, requires non-EU businesses to register for VAT in the EU and charge VAT at the standard rate in force in the member state where their customers reside.

Member states are due to sign up to the new Directive at a meeting of the Council in February 2002. A meeting will be held in January 2002 to agree the ultimate date by which each member state must implement the Directive into domestic law.

Freeserve argued in today’s statement that “the long-standing Business Brief, which treats AOL in the UK as a supplier of content rather than telecommunications services, and gives AOL in the UK a VAT saving of at least £30 million a year, is now more discredited than ever before.”

Commenting on the new proposal, John Pluthero, CEO of Freeserve, said:

“I am bitterly disappointed that despite the new European proposals, Customs and Excise still refuse to make an announcement in relation to the VAT treatment of AOL. The UK government has been sitting on this issue for at least one year and, despite attempts by us to raise the matter with the Treasury Minister, Paul Boateng, he hasn’t even acknowledged our correspondence. Having previously blocked this proposal, Freeserve is calling on the UK government to now implement the new Directive into UK law at the earliest possible opportunity.”