A loophole in UK tax rules has been criticised by Freeserve for
giving AOL an unfair advantage over UK registered ISPs. A report
published earlier this week by investment bank Merrill Lynch drew
attention to an anomaly that requires UK registered ISPs to pay VAT
on their services but does not impose a burden on those registered
in the US, such as AOL.
Freeserve has written to UK Customs & Excise and Chancellor
Gordon Brown requesting a change in the tax system to place all
ISPs in an equal position for tax purposes. The company is not
suggesting that AOL has acted illegally, but rather that the laws
themselves are designed in a way that benefits ISPs based outside
the UK.
According to a Customs & Excise ruling in 1997, an internet
content service provider based outside the UK does not have to pay
VAT, but Freeserve argues that AOL should be classed as a
telecommunications provider and so ought to be liable for VAT. The
company claims that the current situation gives AOL an unfair
advantage and that the amount of VAT owed by the company, if the
rules were to be changed, would be around £30 million per year.
AOL defended its position, saying:
“In keeping with the ruling of UK tax
authorities, AOL is treated as a provider of information services
from outside the European Union, a status available to any other
similarly positioned provider.”
