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News
Customs news
VAT attack
News
Customs news
VAT attack
In an extraordinary attack on large accountancy firms, Dawn Primarolo in a Customs press release (14/2001 dated 12 March 2001) has criticised a VAT scheme used by major high street retailers. The scheme notionally imposes a VAT-exempt card handling fee for credit and debit card transactions. She said that 'the artificiality of the scheme is demonstrated by the fact that customers who pay cash are not given a discount …', and that the Government was 'determined to crack down on tax avoidance of this kind'.
Peter Jenkins, national VAT partner at Ernst & Young, described the words as 'intemperate and bonkers'. He said that Ernst & Young has advised retailers to use the scheme, which reduces the taxable element of transactions paid for by credit or debit cards. It does this by introducing a 'card handling fee' for credit or debit card transactions and this fee is treated as exempt from VAT. The price paid by customers using debit or credit cards is the same price they would pay if they used cash. He said that stores would charge the handling fee to the customer, but this would mean that customer paid more if he used a credit card than if he paid cash, and inevitably would result in the customer going elsewhere.
The scheme was, said Peter Jenkins, within the VAT rules and legally sound. If Customs wished to challenge the scheme, then the place to do so was by means of the tribunal and courts, not a press release.
